405 F.Supp.3d 1317
Ct. Int'l Trade2019Background
- Commerce investigated countervailing subsidies for certain aluminum foil from the PRC (POI: Jan 1–Dec 31, 2016); Zhongji and affiliated entities were mandatory respondents.
- In the preliminary determination Commerce granted Zhongji an export value adjustment (EVA) to account for a Hong Kong affiliate’s mark‑up; verification later revealed issues identifying which sales entered the U.S. and whether shipments were direct.
- Commerce applied facts‑otherwise‑available with adverse inferences (AFA) against the GOC for withholding information about: the Export Buyer’s Credit Program (EBCP), provincial electricity pricing (LTAR), and other subsidies; Commerce found SOCB “policy” loans countervailable.
- In the final determination Commerce denied Zhongji’s EVA, continued to countervail EBCP and electricity (using highest provincial rates as the benchmark), rejected Xeneta freight data and relied on Maersk freight quotes, and countervailed other self‑reported subsidies and SOCB policy loans.
- Zhongji challenged Commerce’s denial of the EVA, Commerce’s use of AFA on the EBCP, and certain benchmark selections; the court reviewed for substantial evidence and legal error.
- The Court sustained Commerce’s findings on electricity, freight benchmark, other subsidies, and policy loans, but remanded the EVA and the EBCP AFA findings for further explanation/consideration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Export Value Adjustment (EVA) — whether Commerce properly denied EVA after verification | Zhongji: Commerce erred; identification of U.S. sales/non‑U.S. sales or use of trading companies does not defeat EVA where invoices entering U.S. bear the affiliate mark‑up and subsidies are allocated over all sales. | Commerce: Zhongji could not reliably identify U.S. sales or demonstrate direct shipment and one‑to‑one invoice correlation after verification, so EVA unsupported. | Remanded: Court held Commerce failed to explain why the verification findings negated EVA given the subsidy allocation methodology; Commerce must clarify the specific record evidence and rationale on remand. |
| EBCP — whether Commerce permissibly applied AFA against cooperating respondents due to GOC noncooperation | Zhongji: Customer non‑use certifications were uncontradicted and verifiable; Commerce lacked record gaps that justified AFA and misapplied AFA for benchmark selection. | Commerce: GOC withheld implementing rules and third‑party bank info necessary to verify non‑use; only Ex‑Im Bank records could fill the gap so AFA was appropriate. | Remanded: Court found Commerce did not adequately identify the specific missing information, explain why it was necessary to verify non‑use, or show that other record steps were impossible; ordered further effort/explanation. |
| Electricity at LTAR — specificity and benchmark selection (tier‑three analysis) | Zhongji: Electricity is publicly available and thus general infrastructure; Commerce failed to explain specificity and benchmark selection across provinces. | Commerce: Notices and record indicate NDRC/provincial coordination and GOC control; GOC withholding prevented showing market‑based pricing so AFA and selection of highest provincial rates were justified. | Sustained: Court agreed electricity provision was not general infrastructure; because GOC withheld province‑level data Commerce’s specificity finding by AFA and selection of highest provincial rates as benchmark is supported. |
| Ocean freight benchmark — Maersk quotes vs. Xeneta data | Zhongji: Maersk data non‑contemporaneous and affected by West Coast labor disputes; Xeneta is superior or should have been averaged. | Commerce: Maersk quotes are reliable market quotes from a reputable source; Xeneta inconsistently includes terminal handling charges and is not publicly available. | Sustained: Court accepted Maersk data as reliable despite non‑contemporaneity and affirmed Commerce’s rejection of Xeneta for inconsistent inclusion of delivery charges and confidentiality. |
| Other subsidies & Policy loans (SOCBs) — scope and benefit | Zhongji: Commerce lacked adequate basis to investigate self‑reported “other subsidies” and mischaracterized SOCB loans as authority financial contribution and preferential benefit. | Commerce: It permissibly opened inquiry into reported subsidies; GOC withheld specificity info so AFA appropriate for other subsidies; record supports SOCBs acting under state policy and loans conferred benefits. | Sustained: Court held Commerce permissibly investigated other self‑reported subsidies and, given GOC withholding, reasonably applied AFA; Commerce’s finding that SOCB loans are authority financial contributions and confer a benefit was supported. |
Key Cases Cited
- Nippon Steel Corp. v. United States, 337 F.3d 1373 (Fed. Cir. 2003) (defines cooperating party’s obligation to act "to the best of its ability" for AFA)
- Changzhou Trina Solar Energy Co. v. United States, 352 F. Supp. 3d 1316 (CIT 2018) (Commerce must identify record gaps and explain why withheld information is necessary to apply AFA)
- Clearon Corp. v. United States, 359 F. Supp. 3d 1344 (CIT 2019) (remanding Commerce’s EBCP AFA where rationale was insufficient)
- Royal Thai Gov’t v. United States, 441 F. Supp. 2d 1350 (CIT 2006) (provision of electricity to an individual consumer is not "general infrastructure")
- Archer Daniels Midland Co. v. United States, 917 F. Supp. 2d 1331 (CIT 2013) (agencies should avoid imposing AFA consequences on cooperating parties when other record sources exist)
- SEC v. Chenery Corp., 318 U.S. 80 (1943) (agency may not rely on post hoc rationalizations for administrative decisions)
- Fine Furniture v. United States, 865 F. Supp. 2d 1254 (CIT 2012) (upholding Commerce’s use of highest provincial electricity rate as benchmark when record tainted by government interference)