Jiangsu Zhongji Lamination Materials Co. v. United States, Slip Op. 19-122

• Citation: 405 F.Supp.3d 1317
• Decision Date: 18 September 2019
• Docket Number: Court No. 18-00089,Slip Op. 19-122
• Parties: JIANGSU ZHONGJI LAMINATION MATERIALS CO., LTD., Shantou Wanshun Package Material Stock Co., Ltd., Jiangsu Huafeng Aluminum Industry Co., Ltd., and Jiangsu Zhongji Lamination Materials Co., (HK) Ltd, Plaintiffs, v. UNITED STATES, Defendant, Aluminum Association Trade Enforcement Working Group and its Individual Members, JW Aluminum Company, Novelis Corporation, and Reynolds Consumer Products LLC, Defendant-Intervenors.
• Court: U.S. Court of International Trade

405 F.Supp.3d 1317

JIANGSU ZHONGJI LAMINATION MATERIALS CO., LTD., Shantou Wanshun Package Material Stock Co., Ltd., Jiangsu Huafeng Aluminum Industry Co., Ltd., and Jiangsu Zhongji Lamination Materials Co., (HK) Ltd, Plaintiffs,

v. UNITED STATES, Defendant,Aluminum Association Trade Enforcement Working Group and its Individual Members, JW Aluminum Company, Novelis Corporation, and Reynolds Consumer Products LLC, Defendant-Intervenors.

Slip Op. 19-122

Court No. 18-00089

United States Court of International Trade.

Dated: September 18, 2019

Jeffrey S. Grimson, Mowry & Grimson, PLLC, of Washington, D.C., for Plaintiffs Jiangsu Zhongji Lamination Materials Co., Ltd., Shantou Wanshun Package Material Stock Co., Ltd., Jiangsu Huafeng Aluminum Industry Co., Ltd., and Jiangsu Zhongji Lamination Materials Co., (HK) Ltd. With him on the briefs were Jill A. Cramer, Sara M. Wyss, Yuzhe PengLing, James C. Beaty, and Bryan P. Cenko.

Aimee Lee, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of New York, NY, for the defendant. With her on the brief were Joseph H. Hunt, Assistant Attorney General, Jeanne E. Davidson, Director, and Tara K. Hogan, Assistant Director. Of counsel on the brief was Mercedes Morno, Office of Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce, of Washington, D.C.

John M. Herrmann, II and Grace W. Kim, Kelley Drye & Warren, LLP, of Washington, D.C., for Defendant-Intervenors Aluminum Association Trade Enforcement Working Group and its Individual Members, JW Aluminum Company, Novelis Corporation, and Reynolds Consumer Products LLC.

OPINION AND ORDER

Restani, Judge:

In this action challenging a final determination and countervailing duty order issued by the United States Department of Commerce ("Commerce") regarding certain aluminum foil from the People's Republic of China ("PRC"), covering the period from January 1, 2016, through December 31, 2016, Jiangsu Zhongji Lamination Materials Co., Ltd. ("Zhongji"), and its affiliated companies, Shantou Wanshun Package Material Stock Co., Ltd. ("Shantou Wanshun"), Jiangsu Huafeng Aluminum Industry Co., Ltd. ("Jiangsu Huafeng"), and Jiangsu Zhongji Lamination Materials Co., (HK) Ltd. ("Zhongji HK"), request that the court hold Commerce's countervailing duty determination to be unsupported by substantial evidence or otherwise not in accordance with law.

BACKGROUND

Following a petition filed by the Aluminum Association Trade Enforcement Working Group and its individual members, JW Aluminum Company, Novelis Corporation, Reynolds Consumer Products LLC (collectively "Petitioners" or "Defendant-Intervenors"), Commerce initiated a countervailing duty ("CVD") investigation into various subsidy programs concerning imports of certain aluminum foil from the PRC. See Certain Aluminum Foil from the People's Republic of China: Initiation of Countervailing Duty Investigation, 82 Fed. Reg. 15,688 (Dep't Commerce Mar. 30, 2017). Commerce selected Zhongji as a mandatory respondent and issued questionnaires to Zhongji and the Government of the PRC ("GOC"). See Certain Aluminum Foil from the People's Republic of China: Preliminary Affirmative Countervailing Duty Determination, 82 Fed. Reg. 37,844 (Dep't Commerce Aug. 14, 2017) ("Prelim. Determination") and accompanying Decision Memorandum for the Preliminary Determination in the Countervailing Duty Investigation of Certain Aluminum Foil from the People's Republic of China, C-570-054, POI 1/1/2016-12/31/2016 at 9–10 (Dep't Commerce Aug. 7, 2017) ("Prelim. I&D Memo"). Commerce sought, inter alia, supporting sales documentation for Zhongji's requested export value adjustment.¹ See Prelim. I&D Memo at 9–10. Zhongji, responding on behalf of itself and all affiliated companies, reported that, during the period of investigation, all of its sales to the United States were made through Zhongji HK, a Hong Kong-incorporated company wholly owned by Zhongji. See Prelim. I&D Memo at 10; see also Preliminary Determination Calculation Memorandum for Zhongji Lamination Materials Co., Ltd at 3, P.R.² 293 (Dep't Commerce Aug. 7, 2017) ("Prelim. Calc. Memo") (examining "Zhongji HK together with Zhongji as a cross-owned, affiliated trading company" pursuant to 19 C.F.R. § 351.525(c) ).³ Zhongji also submitted supporting documentation for its requested export value adjustment. See Zhongji Initial Questionnaire Response at Vol. IV, Ex. 6, P. R. 126-30, C.R. 58–80 (June 12, 2017); Zhongji Second Supplemental Section III Questionnaire Response, C.R. 136, P.R. 212 (July 14, 2017).

In its preliminary determination, Commerce granted Zhongji's requested export value adjustment, adjusting the subsidy rate to account for the mark-up between the export value from the PRC and the value of subject merchandise produced by Zhongji as entered into the United States. See Prelim I&D Memo at 10–11. Commerce used Maersk Shipping Line ("Maersk") price quotes to calculate the benchmark to value ocean freight expenses, excluding Zhongji's proffered freight rates from Xeneta, a freight rate market intelligence firm. See id. at 17–18. Commerce, however, concluded that the GOC withheld information that was requested of it and failed to cooperate to the best of its ability with respect to certain information regarding the Export Buyer's Credit Program ("EBCP"), the provision of electricity at less than adequate remuneration ("LTAR"), and "Other Subsidies" self-reported by Zhongji. See id. at 26–29, 37–42. Accordingly, pursuant to 19 U.S.C. § 1677e(a) – (b), Commerce relied on facts otherwise available and drew adverse inferences to find these programs countervailable. Id. at 45, 52–54. Commerce also countervailed "policy" loans received from PRC state-owned commercial banks ("SOCBs") that were outstanding during the period of review ("POI"). Id. at 42–44. Between October 16, 2017 and October 20, 2017, Commerce verified questionnaire responses submitted by Zhongji pursuant to 19 U.S.C. § 1677m(i). See Verification Report for Zhongji Lamination Materials Co., Ltd, C.R. 285, P.R. 350 (Dep't Commerce Dec. 5, 2017).

After receiving submissions from interested parties, Commerce issued its final determination and assigned Zhongji a 17.14 percent subsidy rate. See Countervailing Duty Investigation of Certain Aluminum Foil from the People's Republic of China: Final Affirmative Determination, 83 Fed. Reg. 9,274, 9,275 (Dep't Commerce Mar. 5, 2018) ("Final Determination"), amended by Certain Aluminum Foil from the People's Republic of China: Amended Final Affirmative Countervailing Duty Determination and Countervailing Duty Order, 83 Fed. Reg. 17,360 (Dep't Commerce Apr. 19, 2018) ("Amended Final Determination");⁴ see also Decision Memorandum for the Final Determination in the Countervailing Duty Investigation of Certain Aluminum Foil from the People's Republic of China, C-570-054, POR 1/1/2016-12/31/2016 (Dep't Commerce Feb. 26, 2018) ("I&D Memo"). In accordance with its verification findings, Commerce denied Zhongji's export value adjustment request. I&D Memo at 42–45. Commerce continued to use an adverse inference from facts otherwise available ("AFA") to countervail subsidies received with respect to the EBCP, the provision of electricity at LTAR, and Zhongji's "Other Subsidies," and continued to find that the SOCB loans were countervailable. I&D Memo at 14–16, 20–23, 29–35, 62–65. Finally, Commerce further relied solely on the Maersk data for the freight benchmark. I&D Memo at 65–66. Zhongji challenges these determinations.

JURISDICTION AND STANDARD OF REVIEW

The court has jurisdiction pursuant to 28 U.S.C. § 1581(c) and 19 U.S.C. § 1516a(a)(2)(B)(i). Commerce's countervailing duty determinations are upheld unless "unsupported by substantial evidence on the record, or otherwise not in accordance with law." 19 U.S.C. § 1516a(b)(1)(B)(i).

DISCUSSION

I. Export Value Adjustment

Commerce must impose countervailing duties equal to the amount of the net countervailable subsidy. 19 U.S.C. § 1671(a). Countervailing duties are imposed through the calculation of individual countervailable subsidy rates for each investigated exporter and producer. See 19 U.S.C. §§ 1671d(c)(1)(B)(i)(I), 1671b(d)(1)(A)(i), 1675(a). The subsidy rate is calculated by "dividing the amount of the benefit allocated to the period of investigation or review by the sales value during the same period of the products to which [Commerce] attributes the subsidy."⁵ 19 C.F.R. § 351.525(a). If the product is exported, the sales value will normally be determined on a free on board ("F.O.B.") (port) basis. Id. Assuming, the F.O.B. export price of the merchandise leaving the foreign country and the import value of the merchandise entering the United States are identical, the collection of duties, based on the import value,⁶ is equal to the net countervailable subsidy, based on the F.O.B. export price. See Ball Bearings and Parts Thereof from Thailand; Final Results of Countervailing Duty Administrative Review, 57 Fed. Reg. 26,646, 26,6647 (Dep't Commerce June 15, 1992) ("Ball Bearings from Thailand"). In other circumstances, however, merchandise leaves a foreign country at an F.O.B. price that is lower than the value at which the merchandise enters the United States. Id. The higher entered value can result when a parent company sells merchandise in a back-to-back intercompany sales transaction to a foreign affiliate, which then sells the merchandise to the United States with a mark-up. Id. Commerce first explained this scenario in Ball Bearings from Thailand:

[I]n this case, there are two F.O.B. export prices for the same sale: the one on which subsidies are applied for and received by [the parent company], and the one which includes [the affiliate's] mark-up and which is the value listed on the [parent company's] invoice accompanying the merchandise to the United States. At verification, [the parent company] demonstrated that their accounting systems are set up

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