Guizhou Tyre Co. v. United States

• Citation: 389 F.Supp.3d 1315
• Decision Date: 15 May 2019
• Docket Number: Consolidated Court No. 18-00100,Slip Op. 19-59
• Parties: GUIZHOU TYRE CO., LTD. ; Guizhou Tyre Import & Export Co., Ltd., Plaintiffs, and Tianjin United Tire & Rubber International Co., Ltd.; Weihai Zhongwei Rubber Co., Ltd.; Consolidated Plaintiffs, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

389 F.Supp.3d 1315

GUIZHOU TYRE CO., LTD. ; Guizhou Tyre Import & Export Co., Ltd., Plaintiffs,andTianjin United Tire & Rubber International Co., Ltd.; Weihai Zhongwei Rubber Co., Ltd.; Consolidated Plaintiffs,

v.UNITED STATES, Defendant.

Slip Op. 19-59

Consolidated Court No. 18-00100

United States Court of International Trade.

May 15, 2019

Matthew P. McCullough, Curtis, Mallet-Prevost, Colt & Mosle LLP, of Washington, D.C., for plaintiffs.

John Tudor, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, D.C., for defendant. With him on the brief were Joseph H. Hunt, Assistant Attorney General, Jeanne E. Davidson, Director, and Franklin E. White, Jr., Assistant Director. Of counsel on the brief was Orga Cadet, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce, of Washington, D.C.

Mark B. Lehnardt, Baker Hostetler, LLP, of Washington, D.C., for consolidated plaintiff Tianjin United Tire and Rubber International Co., Ltd.

R. Kevin Williams, Mark R. Ludwikowski, Lara A. Austrins, Clark Hill PLC, of Chicago, IL, for consolidated plaintiff Weihai Zhongwei Rubber Co., Ltd.

OPINION AND ORDER

Goldberg, Senior Judge:

This action arises from a challenge by plaintiffs Guizhou Tyre Co., Ltd. and Guizhou Tyre Import and Export Co., Ltd., (collectively "Guizhou") as well as consolidated plaintiffs Tianjin United Tire & Rubber International Co., Ltd. ("TUTRIC") and Weihai Zhongwei Rubber Co., Ltd. ("Zhongwei") (collectively "Plaintiffs") to certain aspects of the final results published by the Department of Commerce ("the Department" or "Commerce") of the 2015 Administrative Review of the countervailing duty order on off-the-road tires ("OTR tires") from the People's Republic of China ("PRC"). Certain New Pneumatic Off-the-Road Tires from the People's Republic of China , 83 Fed. Reg. 16,055 (Dep't Commerce Apr. 13, 2018) (final results) (" Final Results ") and accompanying Issues & Decision Mem. ("I & D Mem."), amended by Certain New Pneumatic Off-the-Road Tires from the People's Republic of China , 83 Fed. Reg. 32,078 (Dep't Commerce Jul. 11, 2018) (am. final results) ("Amended Final Results "). Guizhou filed a motion for judgment on the agency record, Pls'. Mot. for J. on Agency R., ECF No. 25 (Sept. 21, 2018) ("Pls.' Br."), challenging Commerce's Amended Final Results with respect to: (1) Commerce's benchmark calculations to determine the extent of subsidies received by Guizhou; (2) Commerce's application of adverse facts available in finding use and benefit from the Export Buyer's Credit Program; and (3) Commerce's decision to countervail the Processing Trade Program. TUTRIC and Zhongwei have adopted and incorporated the challenges brought by Guizhou. TUTRIC Mot. for J. on Agency R., ECF No. 28 (Oct. 12, 2018); Zhongwei Mot. for J. on Agency R., ECF No. 29 (Oct. 14, 2018).

For the reasons discussed below, the court remands the Department's findings with respect to the adverse inference applied to the Export Buyer's Credit Program, sustains and remands in part the Department's benchmark calculations, and sustains the Department's decision to countervail the Processing Trade Program.

BACKGROUND

In November 2016, Commerce initiated a review of the countervailing duty order on certain OTR tires from the PRC based upon timely requests from interested parties during the period of review between January 1, 2015 and December 31, 2015. Antidumping and Countervailing Duty Administrative Reviews , 81 Fed. Reg. 78,778 (Dep't Commerce Nov. 9, 2016) (initiation). Mandatory respondent Guizhou, as well as the Government of China ("GOC"), responded to the Department's initial and supplemental questionnaires. GOC Initial Questionnaire Resp., ECF No 38, J.A. Tab 11 (May 4, 2017) ("GOC Initial Questionnaire Resp."); Guizhou Initial Questionnaire Resp., J.A. Tab 10 (May 4, 2017) ("Guizhou Initial Questionnaire Resp."); GOC First Supp. Resp., J.A. Tab 12 (June 26, 2017) ("GOC First Supp. Resp."). Commerce also conducted a verification of Guizhou's questionnaire responses in December 2017. Verification of the Questionnaire Resps. of Guizhou, J.A. Tab 13 (Feb. 1, 2018) ("Verification Report").

In October 2017, Commerce issued its preliminary results from the administrative review based on the parties' questionnaire responses. Certain New Pneumatic Off-the-Road Tires From the People's Republic of China , 82 Fed. Reg. 46,754 (Dep't Commerce Oct. 6, 2017) (prelim. results) (" Preliminary Results ") and accompanying Prelim. Decision Mem., J.A. Tab 1 (Oct. 2, 2017) ("PDM"). In its preliminary findings, the Department determined that: (1) the Export Buyer's Credit Program was countervailable based on an adverse inference that Guizhou used and benefited from the program, PDM at 14–17; (2) the Processing Trade Program was countervailable because the GOC failed to demonstrate that it had a system or procedure in place to determine the quantity of natural rubber, synthetic rubber, carbon black, and nylon cord Guizhou consumed in the production of OTR tires, id. at 35–36; (3) there was "no basis to find the domestic synthetic rubber market to be distorted," id. at 25; and (4) benchmarks for synthetic rubber, natural rubber, carbon black, and nylon cord inputs appropriately included actual ocean freight and import duty costs, id. at 33–35. As to the Export Buyer's Program, Commerce applied adverse facts available ("AFA") to countervail the program because the GOC allegedly refused to answer Commerce's questions regarding the operation of the program. Id. at 14–17.

The Department's final decision largely echoed its preliminary findings. Commerce continued to find that the market for synthetic rubber was not distorted during the period of review. I & D Mem. at 10–12. Commerce also employed both Tier 1 and Tier 2 benchmarks in relation to certain less-than-adequate remuneration ("LTAR") findings for synthetic and natural rubber (Tier 1), carbon black (Tier 2), and nylon cord (Tier 2). Id. at 12–13. These benchmarks included ocean freight and import duties. Additionally, Commerce applied an adverse inference to find that Guizhou used and benefited from the Export Buyer's Credit Program and concluded that "the record does not support finding non-use of the [Program]." Id. at 14. Finally, Commerce concluded that Guizhou received a countervailable subsidy from the Processing Trade Program because "the record [did] not support a finding that the GOC has an effective system in place to confirm which inputs are consumed in the production of exported products and in what amounts." Id. at 17. This finding was based on the GOC's alleged failure to "explain or document how it determined the quantity of rubber, nylon cord or carbon black consumed in the production process of OTR [t]ires." Id. at 16. In the Amended Final Results , Commerce assigned Guizhou a countervailable subsidy rate of 31.48%. Amended Final Results , 83 Fed. Reg. at 32,078. Commerce assigned this same rate to the "non-selected companies," id. , which included TUTRIC and Zhongwei, id. at 32,079.

Guizhou's motion for judgment challenges each of Commerce's findings above. See generally Pls.' Br. For the reasons discussed below, the court sustains in part and remands in part Commerce's Amended Final Results .

JURISDICTION AND STANDARD OF REVIEW

The court exercises jurisdiction to hear this appeal under 28 U.S.C. § 1581(c). The court will sustain Commerce's determination unless the court concludes that the determination is "unsupported by substantial evidence on the record, or otherwise not in accordance with law ...." 19 U.S.C. § 1516a(b)(1)(B)(i). Substantial evidence amounts to "more than a mere scintilla" of evidence. Universal Camera Corp. v. N.L.R.B. , 340 U.S. 474, 477, 71 S.Ct. 456, 95 L.Ed. 456 (1951). It is "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Id. Moreover, the substantiality of evidence is evaluated "on the record as a whole, including [any evidence that] fairly detracts from its weight." Target Corp. v. United States , 609 F.3d 1352, 1358 (Fed. Cir. 2010) (internal quotation marks and citation omitted). In other words, "substantial evidence" "can be translated roughly to mean ‘is [the determination] unreasonable?’ " Nippon Steel Corp. v. United States , 458 F.3d 1345, 1351 (Fed. Cir. 2006).

DISCUSSION

Plaintiffs raise challenges to the Department's determinations regarding: (1) the PRC's Export Buyer's Credit Program (the "Export Program"); (2) the Department's calculation of benchmarks measuring adequate remuneration for synthetic rubber, carbon black, and nylon cord; and (3) the PRC's Processing Trade Program as a countervailable subsidy. The court sustains Commerce's decision to countervail the Processing Trade Program. For the remaining issues raised by Plaintiffs, the court sustains and remands in part, pursuant to the below.

I. China Export Import Bank Buyer's Credit Program

As in the 2014 Administrative Review,¹ it is the Department's failure to identify a gap in the record that proves fatal to its application of AFA. Commerce's finding that "the record does not support [ ] non-use," I & D Mem. at 14, is itself unsupported by substantial evidence because the only evidence on the record supports non-use. See Guizhou Initial Questionnaire Resp. at 55, ex. I39. Further, because Commerce failed to explain what information the GOC has failed to provide and how that information was required for verification of the respondent's claims and declarations demonstrating non-use of the Export Program, Commerce's finding that the GOC did not provide information necessary to develop a complete understanding of the program was not supported by substantial evidence.

In its review, Commerce examined whether Plaintiffs potentially benefited from the PRC's Export Program, which provides loans to foreign companies to promote the export of Chinese goods. See...