348 F. Supp. 3d 1261
Ct. Int'l Trade2018Background
- Commerce conducted an administrative review (POR: Jan 1–Dec 31, 2014) of countervailing duties on certain off‑the‑road (OTR) tires from the PRC, selecting Guizhou Tyre (GTC) and Xuzhou Xugong (Xugong) as mandatory respondents.
- Commerce preliminarily and finally found programs conveying countervailable subsidies: Export Buyer's Credit (via China Ex‑Im Bank), less‑than‑adequate‑remuneration (LTAR) inputs (synthetic rubber, carbon black, nylon cord), and an exemption program for import duties and VAT on imported raw materials.
- The Government of China (GOC) declined to fully answer certain questions about the Export Buyer's Credit program; plaintiffs and many U.S. customers submitted declarations of non‑use for the program.
- Commerce applied adverse facts available (AFA) to find respondent use of the Export Buyer's Credit program and imposed an adverse rate; it used Tier 2 (world market) benchmarks for synthetic rubber and carbon black (including VAT and import duties) and included ocean freight in the nylon cord benchmark.
- Plaintiffs challenged Commerce's AFA finding and rate selection, the benchmark methodologies (monthly vs. quarterly data, inclusion of VAT/import duties/ocean freight), and countervailability of the import duty/VAT exemption program.
- The Court remanded some Commerce determinations (AFA for Buyer's Credit; ocean freight inclusion for nylon cord; VAT export rebate/ad valorem calculation on the exemption program), but sustained others (use of quarterly Tier 2 data; inclusion of VAT and import duties in Tier 2 benchmarks; countervailability of the import duty/VAT exemption program).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Application of AFA to Export Buyer's Credit program | GTC/Xugong: record (signed customer declarations and GOC statements) shows non‑use; AFA was improper because no material gap on use existed | Commerce: GOC failed to cooperate regarding program operation; AFA warranted and adverse rate applied | Court: AFA improper — Commerce lacked substantial evidence of a record gap as to program use; remand for reconsideration of AFA (consider GOC evidence of non‑use) |
| AFA rate selection (10.54% adverse rate) | Plaintiffs: rate arbitrary; improperly applied hierarchy | Commerce: applied regulatory hierarchy and picked highest calculated rate from other proceedings | Court: Moot as to rate because AFA itself was remanded; also found Commerce’s explanation of hierarchy/application deficient and directed reconsideration on remand |
| Benchmark methodology — Tier 2 data frequency and inclusion of VAT/import duties | Xugong: monthly data preferable for synthetic rubber; Guizhou: VAT/import duties should not be added if not actually paid | Commerce: synthetic rubber market distorted, Tier 2 quarterly data reasonable; VAT/import duties properly included to reflect hypothetical PRC firm’s cost | Court: Sustained use of quarterly Tier 2 data; sustained inclusion of VAT/import duties for synthetic rubber and carbon black (supported and reasonable) |
| Inclusion of ocean freight in nylon cord benchmark | Plaintiffs: Chinese import statistics are CIF (freight‑inclusive); adding ocean freight is duplicative | Commerce: record lacked evidence that Chinese import stats were CIF | Court: Remanded — Commerce failed to consider record evidence indicating CIF valuation; must reassess whether adding ocean freight duplicates reported import prices |
| Countervailability of VAT and Import Duty Exemption for Imported Raw Materials | GTC: GOC/GTC provided documentation and procedures (Processing Trade handbook; customs verification) showing controls/verification so exemption should not be countervailable | Commerce: GOC did not demonstrate a reasonable, effective procedure to confirm inputs consumed for export; benefits flow to non‑consumed inputs | Court: Sustained Commerce — record does not show GOC applied a sufficient verification system; countervailability upheld; remand granted only to recalculate VAT rebate/ad valorem rate as agreed by parties |
Key Cases Cited
- Universal Camera Corp. v. N.L.R.B., 340 U.S. 474 (describes the substantial‑evidence standard)
- Nippon Steel Corp. v. United States, 458 F.3d 1345 (discusses "substantial evidence" review and reasonableness standard)
- Archer Daniels Midland Co. v. United States, 917 F. Supp. 2d 1331 (foreign governments best positioned to describe program administration; avoid AFA impact on cooperating respondents when record contains alternative evidence)
- Essar Steel Ltd. v. United States, 678 F.3d 1268 (permitting inclusion of import charges not actually incurred when calculating world market/Tier 2 benchmarks)
- CS Wind Viet. Co. v. United States, 832 F.3d 1367 (substantial evidence requires consideration of record evidence that detracts from agency findings)