US Defends Commerce 'Levels of Trade' Regulation as Consistent With Statute

The U.S. denied Sept. 9 that the Commerce Department was misinterpreting the statutory standard for determining the existence of sales made by an exporter at different levels of trade (Compania Valencia de Aluminio Baux, S.L.U. v. U.S., CIT # 23-00259).

In response to a Spanish aluminum exporter Compania Valencia de Aluminio Baux’s June motion for judgment (see 2406130052), it said that the law only tells Commerce how to handle different levels of trade if the department decides they exist; it doesn’t force Commerce to define a level of trade “when there are ‘any differences’ in selling activities.”

Statute doesn’t actually define “levels of trade,” the government said. It said Commerce itself defined them in its own regulations, determining that they exist when it finds a “substantial difference” in selling activities.

Baux claimed in its motion for judgment that it makes home market sales on three different trade levels, and that therefore Commerce should have only compared the prices of products it sold on one of those levels with Baux’s U.S. prices.

The department, however, combined all of Baux’s home market sales into a single trade level because Commerce incorrectly requires selling activities between levels of trade be “substantially” different, rather than just merely different, the exporter claimed.

But, first, this argument held that Commerce’s regulation was unlawful based on Step 2 of the recently overturned Chevron analysis, the U.S. said. And it noted that, although Chevron is gone, it's replacement Loper Bright didn’t overturn the U.S. Court of Appeals for the Federal Circuit’s “longstanding recognition” that Commerce should be afforded deference in matters related to antidumping and countervailing duties, “due to their complex and technical nature.”

The statute Baux cites also makes a distinction between “selling activities” and “levels of trade,” it said. The law, 19 U.S.C. 1677b(a)(7)(A), holds that Commerce should adjust for levels of trade if the difference in level of trade “involves the performance of different selling activities.” In other words, “for the statutory provision to apply, Commerce must have already found that the U.S. [level of trade] differs from one or more levels of trade in the comparison market,” it said. Then, the department is allowed to make an adjustment only if that “difference ‘involves’ the performance of different selling activities,” it said. This means that Commerce’s regulations don't conflict with the statute.

The U.S. also disagreed that Baux did make home market sales at different levels of trade. Baux claimed that its home market sales include, first, direct sales to unaffiliated customers; second, downstream sales to affiliate Bancolor; and, third, sales made by Baux's affiliate Bancolor's Madrid DC from warehouses to unaffiliated customers. Baux argued that it mainly sells “full coils of aluminum sheet” to Bancolor and other similar industrial consumers, whereas Bancolor and Madrid DC sell to a “distinct customer base” and perform other services, such as warehousing, small customer support and commissions.

But minor differences in two markets, such as “the fact that a company sells directly to customers in its home market and sells through an affiliate in the United States,” doesn’t mean that sales were made at different levels of trade, the U.S. said.

In this case, Baux simply didn’t provide enough evidence to support a finding that its home market sales involved three levels of trade, it said. The burden of proof, however, rests with the exporter, it said.

“Baux categorized its selling functions by intensity level and assigned numeric values to them, ranked on a scale of zero to ten but did not provide support for these rankings,” the U.S. said. “When asked to support these rankings with source documentation and linkages to its accounting system, it was unable to do so.”