Clearon Corp. v. United States

• Decision Date: 25 January 2019
• Docket Number: Consol. Court No. 17-00171,Slip Op. 19-13
• Citation: 359 F.Supp.3d 1344
• Parties: CLEARON CORP. and Occidental Chemical Corp., Plaintiffs, v. UNITED STATES, Defendant, and Heze Huayi Chemical Co., Ltd., Defendant-Intervenor.
• Court: U.S. Court of International Trade

359 F.Supp.3d 1344

CLEARON CORP. and Occidental Chemical Corp., Plaintiffs,

v. UNITED STATES, Defendant,andHeze Huayi Chemical Co., Ltd., Defendant-Intervenor.

Slip Op. 19-13

Consol. Court No. 17-00171

United States Court of International Trade.

Dated: January 25, 2019

James R. Cannon, Jr., Cassidy Levy Kent (USA) LLP, of Washington, DC, argued for Plaintiffs. With him on the brief was Ulrika K. Swanson.

Sonia M. Orfield, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, argued for Defendant. With her on the brief were Chad A. Readler, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Patricia M. McCarthy, Assistant Director. Of Counsel on the brief was Catherine Miller, Attorney, Office of the Chief Counsel for Import Administration, U.S. Department of Commerce, of Washington, DC.

Gregory S. Menegaz, deKieffer & Horgan, PLLC, of Washington, DC, argued for Defendant-Intervenor. With him on the brief were Alexandra H. Salzman, J. Kevin Horgan, and Judith L. Holdsworth.

OPINION and ORDER

Eaton, Judge:

Two motions for judgment on the agency record are before the court in this consolidated action.¹ Each motion challenges the final results in the United States Department of Commerce's ("Commerce" or the "Department") first administrative review of the countervailing duty order on chlorinated isocyanurates² from the People's Republic of China. Chlorinated Isocyanurates From the People's Rep. of China , 82 Fed. Reg. 27,466 (Dep't Commerce June 15, 2017) and accompanying Dec. Mem. (June 9, 2017), P.R. 117 ("Final DM") (collectively, the "Final Results").

The first motion is that of Defendant-Intervenor (and Consolidated Plaintiff) Heze Huayi Chemical Co., Ltd. ("Heze").³ Heze disputes Commerce's decision to use adverse facts available to determine that the Export Buyer's Credit Program administered by China's state-owned Export-Import Bank ("China ExIm") was countervailable and that Heze used and benefitted from the program. See Heze's Mem. Supp. Mot. J. Agency R., ECF No. 27-1 ("Heze's Br."); see also Heze's Resp. Br., ECF No. 33; Heze's Reply Br., ECF No. 34.

The second motion was filed by Plaintiffs Clearon Corp. and Occidental Chemical Corp. (collectively, "Clearon").⁴ Clearon challenges Commerce's selection of 0.87 percent as the adverse facts available rate for the Export Buyer's Credit Program under the Department's adverse facts available hierarchy method used in reviews. See Pls.' Mem. Supp. Mot. J. Admin. R., ECF No. 28-1 ("Clearon's Br."); see also Pls.' Resp. Br., ECF No. 31; Pls.' Reply Br., ECF No. 35.

Defendant the United States ("Defendant"), on behalf of Commerce, opposes both motions and urges the court to sustain the Final Results. See Def.'s Resp. Pls.' Mots. J. Agency R., ECF No. 32 ("Def.'s Br.").

The court has jurisdiction under 28 U.S.C. § 1581(c) (2012).

Because Commerce's decision to use adverse facts available is neither supported by substantial evidence nor in accordance with law, it is remanded. If, on remand, Commerce continues to determine that Heze used and benefitted from the Export Buyer's Credit Program, and the court sustains that determination, the Department may continue to use the 0.87 percent rate because it is supported by substantial evidence and otherwise is in accordance with law.

BACKGROUND

China ExIm administers loan programs to support the export of Chinese goods and services. Two of these programs are the Export Buyer's Credit Program and the Export Seller's Credit Program.

I. Export Buyer's Credit Program

In order to promote exports, the Export Buyer's Credit Program provides credit at preferential rates to foreign purchasers of goods exported by Chinese companies. See Government of China's Third Suppl. Quest. Resp. (Feb. 8, 2017), P.R. 98, Ex. S3-3 at Art. 2 (Rules Governing Export Buyers' Credit, dated Nov. 20, 2000) (English trans.) (China ExIm extends "mid- to long-term credit loans issued to foreign borrowers used for importers to make payments to Chinese exporters for goods, thereby promoting the export of Chinese goods and technical services."); see also SolarWorld Americas, Inc. v. United States , 41 CIT ––––, ––––, 229 F.Supp.3d 1362, 1363 (2017) (noting rates are "preferential" under the Export Buyer's Credit Program).

II. Export Seller's Credit Program

The Export Seller's Credit Program provides below-market-rate loans to producers and marketers of Chinese products in order to encourage exports. See Chlorinated Isocyanurates From the People's Rep. of China , 79 Fed. Reg. 56,560 (Dep't Commerce Sept. 22, 2014) (final affirmative countervailing duty determination) and accompanying Issues and Dec. Mem. (Sept. 8, 2014), bar code 3227120-01 ("Investigation Final IDM") at 14 (China ExIm extends to sellers of Chinese exports "a loan with a large amount, long maturity, and preferential interest rate."). Like the Export Buyer's Credit Program, the purpose of the Export Seller's Credit Program is "to [provide] support [for] the export of [Chinese] products and improve their competitiveness in the international market." Investigation Final IDM at 14.

III. The Countervailing Duty Investigation of Chlorinated Isocyanurates

The countervailability of the export buyer's and seller's credit programs arose in the original investigation of chlorinated isocyanurates from China, the only prior segment of this proceeding. During the investigation, the Department found that the Export Buyer's Credit Program was not used by the relevant customers of either of the mandatory respondents in the investigation, Hebei Jiheng Chemical Co. Ltd. ("Jiheng") and Juancheng Kangtai Chemical Co. Ltd. This finding was based on declarations of non-use in which the respondents' customers "certified that they did not receive any financing from China ExIm." Investigation Final IDM at 15. Commerce found that it was able to partially verify these statements. Thus, the Department did not countervail the Export Buyer's Credit Program during the original investigation.

As to the Export Seller's Credit Program, however, Commerce determined that the program was countervailable. The record showed that mandatory respondent "Jiheng reported that it had outstanding financing under the export seller's program during the [period of investigation]." Investigation Final IDM at 14. Moreover, the Department observed that, in a separate proceeding, Citric Acid and Certain Citrate Salts From the People's Republic of China , it had countervailed the program. See Investigation Final IDM at 14 (citing Citric Acid and Certain Citrate Salts From the People's Rep. of China , 74 Fed. Reg. 16,836 (Dep't Commerce Apr. 13, 2009) ). Thus, in the investigation, Commerce used the subsidy rate calculated in Citric Acid for the Export Seller's Credit Program, i.e. , 0.87 percent, to calculate the countervailing duty rate for Jiheng, finding no basis in the record not to employ it. See Investigation Final IDM at 14-15.

IV. The Subject Review

On January 7, 2016, Commerce, at the request of Clearon and Heze, among others, initiated the first administrative review. See Initiation of Antidumping of Countervailing Duty Admin. Revs. , 81 Fed. Reg. 736, 737 (Dep't Commerce Jan. 7, 2016) ; see also Clearon's Req. for Admin. Rev. (Nov. 30, 2015), P.R. 3; Heze's Req. for Admin. Rev. (Nov. 6, 2015), P.R. 1. The period of review was February 4, 2014, through December 31, 2014 ("POR"). Heze and Jiheng were selected as mandatory respondents. See Chlorinated Isocyanurates From the People's Rep. of China , 81 Fed. Reg. 89,896 (Dep't Commerce Dec. 13, 2016) (preliminary results) and accompanying Prelim. Dec. Mem. (Dec. 5, 2016), P.R. 80 ("Prelim. Dec. Mem.").

Commerce issued multiple countervailing duty questionnaires to Heze and the Government of China ("GOC"), seeking information about China ExIm's export buyer's and seller's credit programs, including internal China ExIm guidelines that were adopted in 2013, i.e. , after the period of investigation (which covered calendar year 2012) and before the POR, in connection with amendments to the Export Buyer's Credit Program.

Heze maintained in its questionnaire responses that it did not benefit, directly or indirectly, from either the Export Buyer's Credit Program or the Export Seller's Credit Program during the POR. Further, it asserted that none of its relevant customers used the Export Buyer's Credit Program during the POR, and filed three customer declarations certifying their non-use of the program. See Heze's Sec. III Quest. Resp. (May 16, 2016), C.R. 17-22 at 10-11. Ultimately, Heze would submit a total of forty-four declarations of non-use by its U.S. and non-U.S. customers during the course of the review proceeding. See Heze's Third Suppl. Quest. Resp. (Feb. 15, 2017), C.R. 83, Ex. SQ3-1.

For its part, the GOC also stated that Heze had not received buyer's or seller's credit during the POR. See GOC's Initial Countervailing Duty Quest. Resp. (May 16, 2016), P.R. 30 at 7. Echoing Heze's claims regarding its customers' non-use of buyer's credits, the GOC stated that "[n]one of the [mandatory] respondent's customers used Export Buyer's Credits."⁵ GOC's Third Suppl. Quest. Resp. at 2. In response to the Department's request for the 2013 internal guidelines, the GOC declined to provide them, stating that China ExIm's "2013 guidelines are internal to the bank, non-public, and not available for release." GOC Third Suppl. Quest. Resp., Ex. S3-1 at 3.

Based on the responses of Heze and the GOC, the Department made a preliminary finding that Heze did not use the Export Seller's Credit Program during the POR. See Prelim. Dec. Mem. at 16. With respect to the Export Buyer's Credit Program, however, Commerce continued to seek more information from the GOC about the operation of the program, and how it may have changed because of the 2013 amendments, and stated that it would publish its findings on the use of this program in a post-preliminary results...