Beijing Tianhai Industry Co. v. United States
2015 CIT 14
Ct. Intl. Trade2015Background
- BTIC’s subsidy case concerns the Department of Commerce’s countervailing duty ruling on High Pressure Steel Cylinders from the PRC with POI January 1, 2010 to December 31, 2010.
- Commerce initiated the countervailing duty investigation in June 2011, naming BTIC and its cross-owned affiliates, including Tianjin Tianhai, as mandatory respondents.
- The Department found that an Unaffiliated Producer and an Affiliated Producer (BTIC’s cross-owned, a state-owned entity) were authorities under 19 U.S.C. § 1677(5)(B) and that BTIC/Tianjin Tianhai received a benefit via these inputs sold through third-party trading companies.
- Because domestic PRC steel-tube prices were distorted, Commerce used a tier-two benchmark (world market prices available to PRC buyers) rather than a PRC market price, and ultimately averaged Ukraine, Italy, and Iran prices for the Final Determination.
- BTIC challenged the Final Determination, and the court sustained Commerce’s methodology, including the indirect subsidy theory and the benchmark calculation, through to the countervailing duty order issued June 21, 2012.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Unaffiliated Producer is an authority. | BTIC argues ownership data in the articles of association show not majority government ownership. | Commerce properly relied on the capital verification report as contemporaneous ownership information showing majority government ownership. | Yes; substantial evidence supports Unaffiliated Producer as an authority. |
| Whether BTIC’s purchases via third-party trading companies can be countervailed. | BTIC contends the subsidy did not flow to BTIC because the input supplier was not cross-owned with BTIC. | Commerce may countervail based on a financial contribution to the trading companies that conferred a benefit on BTIC through its purchases. | Counts as countervailable; the financial contribution need not be conferred on the same recipient as the benefit. |
| Whether the Department’s benchmark selection for steel tube (tier-two) and its averaging method complies with 19 C.F.R. § 351.511(a)(2)(ii). | BTIC argues Ukraine data alone should be used because it matches BTIC’s diameters; also argues averaging across countries is inappropriate. | Commerce may average multiple world-market prices to construct a reasonable benchmark under the regulation; differing diameters are accounted for by comparability rules. | Yes; averaging Ukraine, Italy, and Iran prices to form a tier-two benchmark is lawful. |
| Whether the VAT, import duties, and inland freight costs should be added to the benchmark price. | BTIC asserts VAT/duties may not apply to its export-oriented purchases and inland freight data should not be used variably. | Regulations require delivered prices including such charges to reflect market conditions; tier-two benchmarks may include these costs. | Yes; inclusion of VAT, import duties, and inland freight in the benchmark is consistent with law. |
Key Cases Cited
- Guangdong Wireking Housewares & Hardware Co. v. United States, 900 F. Supp. 2d 1362 (S.D.N.Y. 2013) (upholds treating input suppliers as authorities and countervailing indirect subsidies)
- Guangdong Wireking Housewares & Hardware Co. v. United States, 745 F.3d 1194 (Fed. Cir. 2014) (affirmation on appeal of downstream subsidy approach)
- Delverde, SRL v. United States, 202 F.3d 1360 (Fed. Cir. 2000) (limits automatic pass-through of subsidies in asset transfers)
- AK Steel Corp. v. United States, 192 F.3d 1367 (Fed. Cir. 1999) (requires nexus between financial contribution and benefit)
- Essar Steel Ltd. v. United States, 678 F.3d 1268 (Fed. Cir. 2012) (supports use of tier-two benchmarks and accompanying adjustments)