CIT Remands Specificity Finding of CVD on Turkish Foreign Exchange Transactions Tax Exemption

The Court of International Trade on Oct. 21 sent back the Commerce Department's de jure specificity finding regarding exporter Kaptan Demir Celik Endustrisi ve Ticaret's exemption from Turkey's 0.2% Banking and Insurance Transactions Tax on foreign exchange transactions. Judge Gary Katzmann said that, in the 2020 review of the countervailing duty order on Turkish rebar, the agency failed to show that the exemption was limited by enterprise or industry.

In addition, the judge remanded Commerce's rejection of a report prepared by Cushman & Wakefield (C&W) to value land used for free by Kaptan's affiliated supplier, finding that the agency didn't reject the report "on a sound legal basis." Katzmann similarly rejected the agency's use of a report prepared by Colliers International as a benchmark to value the land, which Commerce justified by saying it was the only usable option due to the unusability of the C&W report.

In the review, Commerce countervailed Kaptan's Banking and Insurance Transactions Tax exemption, finding it specific as a matter of law. Katzmann rejected this finding, holding that Turkish law doesn't "appear to expressly limit" it to an "enterprise or industry." Instead, the law seems to "support a conclusion of broad, economy-wide eligibility for the subsidy."

The relevant provision in Turkish law says that companies that have an industrial registry certificate are exempted from the tax on foreign exchange transactions, additionally requiring a "broad range" of companies to obtain the certificate. Subject to this requirement are "places that produce or obtain a material continuously and in series by changing the characteristics, shape, precision or composition of a substance" or by processing these substances with equipment, looms, machinery, tools or other means. Also covered are places that conduct "continuous and serial repairs and plants that produce electricity or other energy," including large construction sites and companies that produce information technology.

Katzmann said this isn't a "narrow or industry-specific list of companies" and "instead appears" to cover "virtually every company of a certain size." This seemingly would make the exemption "broad and non-enterprise- or industry-specific," the decision said.

The U.S. defended its position by claiming that the relevant enterprise or industry is the category of enterprises or industries that both conducted foreign business transactions and satisfied one of the law's other conditions. The petitioner said the relevant category is "industrial enterprises." Katzmann rejected both readings as "implausibly far-reaching." He said it's "hard to discern what, if anything, they would exclude." The mere fact that subsidy eligibility is limited doesn't mean the limitation "delineates an enterprise or industry," the judge said. Holding otherwise would make "enterprise or industry" an "empty term."

Commerce didn't explain what the applicable enterprise or industry would even be, instead basing its specificity decision on the idea that even if Turkish law establishes broad eligibility, this doesn't show that all eligible enterprises actually obtain the certificates. Such an explanation, however, is reserved for de facto specificity analyses, which Commerce didn't rely on in this instance, the judge said.

Katzmann also rejected the agency's use of the Colliers report in countervailing the free use of land by Kaptan's affiliated supplier. Kaptan objected to the use of the Colliers report on the grounds that it had a lack of external confirmations of its reliability and that it was completely unrepresentative of the actual land used.

The judge held that while Commerce at least directly addressed the reliability concerns, the "same cannot be said about Commerce's treatment of Kaptan's second, methodological objection." The agency said the Colliers report was the only usable one left on the record only after rejecting the C&W report for being unusable. Such a decision could stand if the agency "had based its determination of the C&W report's per se unusability on a sound legal basis," the judge said.

Commerce could have properly rejected the C&W report if it found it to be untimely filed or failed to meet any of the statutory criteria, but no such finding was made. Instead, the agency said the C&W report is entirely business proprietary information, commissioned for litigation and partially based on prices provided by non-private entities. These reasons "might indeed weigh against Commerce's use of the C&W report on reliability grounds," but they don't lift the agency's burden to "respond to Kaptan's objections to the use of the Colliers report," the opinion said.

(Kaptan Demir Celik Endustrisi ve Ticaret v. U.S., Slip Op. 24-116, CIT # 23-00131, dated 10/21/24; Judge: Gary Katzmann; Attorneys: David Simon of Law Office of David Simon for plaintiff Kaptan Demir Celik Endustrisi ve Ticaret; Jessica DiPietro of ArentFox for plaintiff-intervenor Icdas Celik Enerji Tersane ve Ulasim Sanayi; Kelley Geddes for defendant U.S. government; Maureen Thorson of Wiley Rein for defendant-intervenor Rebar Trade Action Coalition)