Clearon Corp. v. United States

• Decision Date: 08 October 2020
• Docket Number: Consol. Court No. 17-00171,Slip Op. 20-141
• Citation: 474 F.Supp.3d 1339
• 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

474 F.Supp.3d 1339

CLEARON CORP. and Occidental Chemical Corp., Plaintiffs,

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

Slip Op. 20-141

Consol. Court No. 17-00171

United States Court of International Trade.

October 8, 2020

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

Sonia M. Orfield, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, argued for Defendant. With her on the brief were Joseph H. Hunt, 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 Trade Enforcement and Compliance, 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 J. Kevin Horgan and Alexandra H. Salzman.

OPINION and ORDER

Eaton, Judge:

Before the court are the remand results of the United States Department of Commerce ("Commerce" or the "Department"), pursuant to the court's order in Clearon Corp. v. United States, 43 CIT ––––, 359 F. Supp. 3d 1344 (2019) (" Clearon I ").¹ See Final Results of Redetermination Pursuant to Court Order (May 16, 2019), P.R.R.² 5 ("Remand Results"). Jurisdiction lies pursuant to 28 U.S.C. § 1581(c) (2012) and 19 U.S.C. § 1516a(a)(2)(B)(iii) (2012).

In the final results under review in Clearon I, Commerce used adverse facts available, pursuant to its authority under 19 U.S.C. § 1677e(a) - (b),³ to determine a countervailing duty rate for Consolidated Plaintiff and Defendant-Intervenor Heze Huayi Chemical Co., Ltd. ("Heze"),⁴ a mandatory respondent. The Department found that the use of adverse facts available was warranted, even though Heze had been cooperative, because the Government of China ("China") failed to provide information that Commerce requested about the operation of a governmental loan program called the Export Buyer's Credit Program.⁵ See Chlorinated Isocyanurates From the People's Rep. of China, 82 Fed. Reg. 27,466 (Dep't Commerce June 15, 2017) ("Final Results") and accompanying Issues and Dec. Mem. (June 9, 2017), P.R. 117 ("Final IDM"). Without this information, Commerce found it could not fully understand the program, and therefore could not verify Heze's declarations of non-use of the program; thus, Commerce found the declarations unreliable. Using adverse facts available, Commerce then concluded that Heze had used and benefitted from the program during the period of review. In other words, it used adverse facts available to find that the statutory requirement, that a respondent receive a "benefit" from a "financial contribution" (e.g., a government loan), was satisfied. See 19 U.S.C. § 1677(5)(B) (defining subsidy). Commerce found that Heze used and benefitted from the program, notwithstanding uncontroverted declarations on the record stating that neither Heze nor its customers had used or benefitted from the program during the period of review.

Thereafter, the Department selected an adverse facts available subsidy rate for the Export Buyer's Credit Program by applying its hierarchical method for administrative reviews. The Department selected a 0.87 percent rate, which had been determined for a governmental loan program (the Export Seller's Credit Program) in a prior segment of the same proceeding. See Clearon I, 43 CIT at ––––, 359 F. Supp. 3d at 1360-62 ; 19 U.S.C. § 1677e(d) (Supp. III 2015).

When calculating the net countervailing duty rate for Heze, Commerce included the ad valorem subsidy rate of 0.87 percent as a part of its calculation (i.e., as an adverse facts available rate for the Export Buyer's Credit Program).⁶ With the addition of subsidy rates for electricity provided for less than adequate remuneration, and for self-reported grants, Heze received a net countervailing duty rate of 1.91 percent,⁷ which it appealed to this Court. See Final Results, 82 Fed. Reg. at 27,467 ; Final IDM at 7.

In Clearon I , the court held that Commerce's use of adverse facts available could not be sustained because the agency had failed to explain, and support with record evidence, its finding that the operational information that was missing from the record was "necessary"—a statutory requirement that must be satisfied before Commerce may apply an adverse inference to the missing information. See 19 U.S.C.§ 1677e(a) - (b). In particular, the court found, Commerce had failed to "tie its facts available determination (and therefore its adverse facts available determination) to Heze, its products, or its customers," and remanded the matter for further action. See Clearon I , 43 CIT at ––––, 359 F. Supp. 3d at 1360.

In the Remand Results, now before the court, Commerce again found that necessary information was missing from the record. For Commerce, information about the operation of the Export Buyer's Credit Program was necessary because without it, verification of Heze's claims that neither it, nor its customers, used or benefitted from the program during the period of review would be "unreasonably onerous, if not impossible." See Remand Results at 19. The "unreasonably onerous" finding was made without an actual attempt to verify the claims of non-use.

For the reasons below, Commerce's explanation, that the missing operational information was necessary to permit verification of the evidence supporting Heze's claims of non-use, lacks the support of substantial evidence and is otherwise not in accordance with law. This matter is remanded again for Commerce to at least attempt to verify this evidence, which is pertinent to the statutory inquiry of whether a "benefit" was received by Heze. See 19 U.S.C. § 1677(5)(B). Based on the results of verification, Commerce must then determine whether "the manufacture, production, or export of" Heze's merchandise was unlawfully subsidized. See 19 U.S.C. § 1671(a)(1). The parties are directed to confer and agree upon a procedure that will allow Commerce to verify Heze's declarations of non-use. Alternatively, Commerce may find, based on the existing record evidence, that neither Heze nor its customers used or received a benefit under the program.

BACKGROUND

I. Summary of Relevant Statutory Background

Under the countervailing duty statute, Commerce is tasked with determining whether "the government of a country or any public entity within the territory of a country is providing, directly or indirectly, a countervailable subsidy with respect to the manufacture, production, or export of a class or kind of merchandise imported, or sold (or likely to be sold) for importation, into the United States." 19 U.S.C. § 1671(a)(1). A subsidy is countervailable when (1) a foreign government provides a financial contribution, such as a loan, (2) to a specific industry, and (3) a recipient within the industry receives a benefit as a result of that contribution. See id. § 1677(5)(A), (B), (D). If Commerce determines that each of these elements is satisfied, then it must impose a duty equal to the amount of the net countervailable subsidy. Id. § 1671(a)(1).

Under the adverse facts available statute, if Commerce determines that "necessary information is not available on the record," or a party withholds information that has been requested by Commerce, Commerce must use "facts otherwise available" to fill in the gaps in the record. See 19 U.S.C. § 1677e(a). If Commerce determines that the use of facts otherwise available is warranted, and makes the additional finding that a party "has failed to cooperate by not acting to the best of its ability to comply with a request for information," it may use an adverse inference "in selecting from among the facts otherwise available." 19 U.S.C. § 1677e(b).

The aim of the adverse facts available statute is to encourage future compliance with Commerce's requests for information, not to punish. See Bio-Lab, Inc. v. United States, 44 CIT ––––, ––––, 435 F. Supp. 3d 1361, 1368 (2020) (citation omitted). In countervailing duty cases, where a foreign government is the primary possessor of information about, e.g., governmental loan programs, courts have found permissible Commerce's use of adverse facts available even when it has an adverse impact on a cooperative respondent. See Fine Furniture (Shanghai) Ltd. v. United States, 748 F.3d 1365, 1371, 1373 (Fed. Cir. 2014). "The rationale for permitting the application of [adverse facts available] to cooperative respondents is that ‘a remedy that collaterally reaches [a cooperative respondent] has the potential to encourage the [foreign government] to cooperate so as not to hurt its overall industry.’ " Bio-Lab, 44 CIT at ––––, 435 F. Supp. 3d at 1368 (quoting Fine Furniture, 748 F.3d at 1373 ).

II. Factual Background

The factual background of this case is set out in detail in Clearon I, familiarity with which is presumed. The facts pertinent to the issues discussed in this opinion are summarized here.

The China Export Import Bank, a state-owned entity, administers the Export Buyer's Credit Program, through which it 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." Clearon I, 43 CIT at ––––, 359 F. Supp. 3d at 1347.

Here, Commerce sought information about the program by issuing questionnaires to Heze and China. Commerce asked Heze, inter alia, whether the company or its customers used or benefitted from the program during the period of review. Heze answered that neither it nor its customers used or benefitted, directly or indirectly, from the program, and filed customer declarations certifying their non-use of the program. See id., 43 CIT at ––––, 359 F. Supp. 3d at 1347. The company submitted a total of...