Archer Daniels Midland Co. v. United States, Slip Op. 19-103

399 F.Supp.3d 1296

ARCHER DANIELS MIDLAND COMPANY, Cargill, Incorporated, and Tate & Lyle Americas LLC, Plaintiffs,

v.UNITED STATES, Defendant.

Slip Op. 19-103

Court No. 18-00160

United States Court of International Trade.

August 2, 2019

Patrick J. Togni and Stephen A. Jones, King & Spalding LLP, of Washington, DC, for Plaintiffs.

Meen Geu Oh, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, for Defendant. With him on the brief were Joseph H. Hunt, Assistant Attorney General, Jeanne E. Davidson, Director, and Reginald T. Blades, Jr., Assistant Director. Of counsel on the brief was Mykhaylo A. Gryzlov, Senior Counsel, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce, of Washington, DC.

OPINION

Barnett, Judge:

Plaintiffs, Archer Daniels Midland Company, Cargill, Incorporated, and Tate & Lyle Americas LLC (collectively, "Archer Daniels") move, pursuant to U.S. Court of International Trade Rule 56.2, for judgment on the agency record, challenging the U.S. Department of Commerce's ("Commerce" or "the agency") final negative determination in the countervailing duty ("CVD") investigation of citric acid and certain citrate salts from Thailand. See Mot. for J. on the Agency R., ECF No. 19; Citric Acid and Certain Citrate Salts From Thailand , 83 Fed. Reg. 26,004 (Dep't Commerce June 5, 2018) (final negative countervailing duty determination, and final negative critical circumstances determination) (" Final Determination "), ECF No. 15-1, and accompanying Issues and Decision Mem., C-549-834 (May 29, 2018) ("I & D Mem."), ECF No. 15-2.¹

Archer Daniels' dispute stems from the importation of select equipment and machinery ("the machinery") from the People's Republic of China ("China") into Thailand by COFCO Biochemical (Thailand) Co., Ltd. ("COFCO"); Niran (Thailand) Co., Ltd. ("Niran"); and Sunshine Biotech International Co., Ltd. ("Sunshine") (collectively, "Respondents"). Respondents imported the machinery duty-free pursuant to Section 28 of Thailand's Investment Promotion Act ("IPA Section 28"), a subsidy program exempting certain imported machinery from payment of import duties when used in specified projects. See I & D Mem. at 8-12. Commerce determined, however, that duty-free importation of the machinery from China pursuant to IPA Section 28 conferred no benefit because, absent IPA Section 28 eligibility, the duty rate on the machinery imports would have been zero pursuant to the "ASEAN-China FTA."² I & D Mem. at 11, 18.

Archer Daniels contends that Commerce's determination is unsupported by substantial evidence and is otherwise not in accordance with law because the record shows that Respondents did not import the machinery pursuant to the ASEAN-China FTA and could not have complied with its requirements. See Pls.' Rule 56.2 Br. in Supp. of Mot. for J. on the Agency R. ("Pls.' Br.") at 1-2, ECF No. 31. Defendant, United States ("the Government"), contends that Commerce's determination is supported by substantial evidence and is otherwise in accordance with law because the record is "replete" with documents demonstrating that Respondents' machinery "originated from China." See Def.'s Corrected Resp. to Pls.' Rule 56.2 Mot. for J. Upon the Agency R. ("Def.'s Resp.") at 5, ECF No. 34. For the reasons discussed herein, Archer Daniels' motion is denied.

BACKGROUND

I. Legal Framework

In order to offset the unfair competitive advantages created by foreign subsidies, "Commerce is required to impose countervailing duties on merchandise that is produced with the benefit of government subsidies" when it causes material injury to a domestic industry. Fine Furniture (Shanghai) Ltd. v. United States , 748 F.3d 1365, 1369 (Fed. Cir. 2014) ; see also Zenith Radio Corp. v. United States , 437 U.S. 443, 455-56, 98 S.Ct. 2441, 57 L.Ed.2d 337 (1978) (discussing the purpose of CVD law); 19 U.S.C. § 1671(a). "Such a subsidy exists when (1) a foreign government provides a financial contribution (2) to a specific industry and (3) a recipient within the industry receives a benefit as a result of that contribution." Fine Furniture (Shanghai) , 748 F.3d at 1369 (citing 19 U.S.C. § 1677(5)(B) ). In other words, to constitute a countervailable subsidy, a foreign government must provide "a specific financial contribution to a party and that party [must] benefit[ ] from the contribution."

Essar Steel Ltd. v. United States , 678 F.3d 1268, 1272 (Fed. Cir. 2012) (citing 19 U.S.C. § 1677(5) ).

A party benefits from the contribution when "taxes or import charges paid by a firm as a result of the program are less than the taxes the firm would have paid in the absence of the program." 19 C.F.R. § 351.510(a)(1). Thus, in order to measure the value of the financial contribution, Commerce must calculate the taxes the firm would have paid absent the countervailable program. See Royal Thai Gov't v. United States , 32 C.I.T. 97, 100, 534 F. Supp. 2d 1373, 1377 (2008) (" Royal Thai V "), aff'd sub nom. Royal Thai Gov't v. U.S. Steel Corp. , 312 F. App'x 342 (Fed. Cir. 2009). In furtherance of this inquiry, "Commerce must establish a benefit calculation benchmark, or more precisely, determine what tariff rate would have applied absent the alleged subsidy. Once this benchmark is established, Commerce will have a reference point from which it can determine the amount of benefit that has been conferred." Id. It is Commerce's selection of a benchmark that is at issue here.

II. Factual and Procedural History

On June 22, 2017, Commerce initiated a countervailing duty investigation into citric acid and certain citric salts from Thailand. See Citric Acid and Certain Citrate Salts From Thailand , 82 Fed. Reg. 29,836 (Dep't Commerce June 30, 2017) (initiation of countervailing duty investigation). The period of investigation was January 1, 2016, through December 31, 2016. Id. at 29,837.

Commerce selected COFCO, Niran, and Sunshine as mandatory respondents in the investigation and issued them questionnaires. Selection of Respondents for the Countervailing Duty Investigation on Citric Acid and Certain Citrate Salts from Thailand (July 21, 2017) at 1, CR 11, PR 38, CJA Tab 3, PJA Tab 3; I & D Mem. at 2-3. Commerce also issued a questionnaire to the Royal Thai Government ("the RTG"). I & D Mem. at 2. Respondents reported receiving zero benefit for duty-exemptions applied to the machinery because, absent IPA Section 28 eligibility, the machinery would have been eligible for duty-free treatment pursuant to the ASEAN-China FTA. See Royal Thai Gov't, CVD Questionnaire Resp. (Sept. 8, 2017) ("RTG QR") at 10, CR 55, PR 90, CJA Tab 7, PJA Tab 7; Sunshine Biotech Int'l Co., Ltd. CVD Questionnaire Resp. (Sept. 8, 2017) ("Sunshine QR") at 9, CR 15, PR 81, CJA Tab 4, PJA Tab 4; Initial Questionnaire Resp. (Sept. 8, 2017) ("COFCO QR") at 9, CR 44, PR 88, CJA Tab 5, PJA Tab 5; Initial Questionnaire Resp. (Sept. 8, 2017) ("Niran QR") at 10, CR 49, PR 89, CJA Tab 6, PJA Tab 6.

The ASEAN-China FTA is a free trade agreement among the ten nations of the Association of Southeast Asian Nations and China that establishes a free trade area between its members. See Pet'rs' Rebuttal Factual Information Submission Regarding the 9/8/17 Initial Questionnaire Resps. (Sept. 22, 2017) ("Archer Daniels' Rebuttal Submission") Ex. 1 at 275, CR 102, PR 131, CJA Tab 8, PJA Tab 8 (listing the ASEAN-China FTA member states). This multilateral trade agreement, among other things, exempts equipment and machinery imported into Thailand from China from ordinary Thai import duties. I & D Memo. at 18; see also RTG QR at 10. The ASEAN-China FTA contains rules of origin that prescribe varying requirements depending on the type of good. See Archer Daniels' Rebuttal Submission, Ex. 1 at 261-272. Thai companies may claim ASEAN-China FTA treatment by producing a certificate of origin issued pursuant to the ASEAN-China FTA, which demonstrates that the goods originated in a member country (i.e., China).

See id. , Ex. 1 at 265, 267-69. However, the issuance of a certificate of origin does not necessarily confer ASEAN-China FTA preferential tariff treatment on those imports, which remain subject to verification procedures implemented by the importing member. See id. , Ex. 1 at 270-272 (ASEAN-China FTA Rules 16, 19 and 21).

On November 3, 2017, Commerce preliminarily determined that certain Thai producers of citric acid were not receiving countervailable subsidies. See Citric Acid and Certain Citrate Salts From Thailand , 82 Fed. Reg. 51,216 (Dep't of Commerce Nov. 3, 2017) (prelim. negative countervailing duty determination, prelim. negative critical circumstances determination and alignment of final determination with final antidumping duty determination); Decision Mem. for the Prelim. Negative Countervailing Duty Determination, Prelim. Negative Critical Circumstances Determination and Alignment of Final Determination with Final Antidumping Duty Determination (Oct. 30, 2017) ("Prelim. Mem.") at 1, PR 172, CJA Tab 10, PJA Tab 10. While Commerce found that IPA Section 28's duty exemptions, as applied to Respondents' imported Chinese machinery, "constitute[d] a financial contribution in the form of revenue foregone," Commerce further found that "such duty-free imports [did] not confer a benefit" because the duty rates on the machinery "would have been zero" absent Respondents' participation in the IPA Section 28 program. Prelim. Mem. at 11. Commerce based its finding on evidence indicating that the machinery would have alternatively qualified for duty-free treatment pursuant to the ASEAN-China FTA. Id. Although Commerce countervailed other IPA Section 28 duty-exemptions conferred upon Respondents' non-ASEAN-China FTA eligible machinery and equipment, Respondents' preliminary subsidy rates were de minimis . See id. at 11, 13.

In November and December of 2017, Commerce conducted verification of Respondents' questionnaire...