RZBC Grp. Shareholding Co. v. United States, Slip Op. 16-64

RZBC GROUP SHAREHOLDING CO., LTD., RZBC CO., LTD.,RZBC IMP. & EXP. CO., LTD., and RZBC (JUXIAN) CO., LTD., Plaintiffs, v. UNITED STATES, Defendant,andARCHER DANIELS MIDLAND COMPANY, CARGILL, INCORPORATED,and TATE & LYLE INGREDIENTS AMERICAS LLC, Defendant-Intervenors.

Slip Op. 16-64 Court No. 15-00022

UNITED STATES COURT OF INTERNATIONAL TRADE

June 30, 2016

Before: Richard W. Goldberg, Senior Judge

PUBLIC VERSION

OPINION AND ORDER

[Remanding in part the Final Results of a review of a countervailing duty order on citric acid from the People's Republic of China.]

Michael S. Holton, Husch Blackwell LLP, of Washington, DC, argued for plaintiffs. With him on the brief was Jeffrey S. Neeley.

Patricia M. McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, argued for defendant. With her on the brief were Melissa M. Devine, Trial Attorney, Benjamin C. Mizer, Principal Deputy Assistant Attorney General, and Jeanne E. Davidson, Director. Of counsel on the brief was Whitney M. Rolig, Attorney, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce, of Washington, DC.

Patrick J. Togni, King & Spalding LLP, of Washington, DC, argued for defendant-intervenors. With him on the brief was Joseph W. Dorn.

Goldberg, Senior Judge: This case concerns the fourth administrative review of a countervailing duty order on citric acid and certain citrate salts from the People's Republic of China (the "PRC"). See Citric Acid and Certain Citrate Salts from the People's Republic of China, 79 Fed. Reg. 78,799 (Dep't Commerce Dec. 31, 2014) (final admin. review) ("Final Results") (covering imports from January 1, 2012 to December 31, 2012). Plaintiffs, the RZBC Group Shareholding Co. and related companies ("RZBC"), sue to reduce the final countervailing duty rate imposed on them by the U.S. Department of Commerce ("Commerce" or "the agency"). Constituents of the U.S. domestic industry—including Archer Daniels Midland Company, Cargill, Incorporated, and Tate & Lyle Ingredients Americas ("ADM")—side with the agency in defending the countervailing duty rate against these attacks.

After carefully considering the parties' briefs and the record, the court remands one issue to commerce for reconsideration: the adverse inference that RZBC benefited from the Buyer's Credit program.

GENERAL BACKGROUND

Countervailing duties serve the same purpose as their better-known cousins, antidumping duties: They level the playing field between U.S. manufacturers and their overseas competition. But each regime addresses a different problem. Antidumping duties were made to fight price discrimination, so if a foreign producer sells goods in the United States for less than in the home market, antidumping duties bring the U.S price back to fair value. See 19 U.S.C. § 1673 (2012). Countervailing duties ("CVDs"), by contrast, were created to correct the cost-distorting effect of subsidies. When a foreign government lends support to a producer, CVDs boost the producer's U.S. prices to offset the net benefit from the subsidy. See id. § 1671(a).

In the review underlying this appeal, Commerce imposed a 17.55% total CVD rate on RZBC's citric acid exports. Final Results, 79 Fed. Reg. at 78,800. With this duty, Commerce aimed to offset the benefit RZBC received from concessional loans, steam coal, sulfuric acid, limestone flux, land purchases, and other subsidies from the PRC. See I&D Mem. 14-32, PD 226 (Dec. 22, 2014). On appeal, RZBC contests aspects of Commerce's work, including (1) the agency's decision to adversely infer that RZBC benefited from a concessional lending program called the Buyer's Credit program; (2) the decision to impose an adverse 10.54% rate with respect to the Buyer's Credit program; (3) the agency's selection of benchmark sources for steam coal, sulfuric acid, and limestone flux; (4) the agency's selection of benchmark sources for a land-purchase subsidy benchmark; and (5) the decision not to omit "special equipment services" surcharges from certain price quotes used to calculate the international freight-rate component of the limestone flux benchmark.

The court has jurisdiction to hear these claims under 28 U.S.C. § 1581(c). The court must uphold the agency's results unless they are "unsupported by substantial evidence on the record, or otherwise not in accordance with law." 19 U.S.C. § 1516a(b)(1)(B)(i).

DISCUSSION

In light of this standard, the court remands for reconsideration Commerce's adverse inference that RZBC benefited from the Buyer's Credit program. Given the remand on the adverse-inference issue, the court has no cause to consider the validity of the ultimate 10.54% adverse-interest rate. With respect to the remaining issues, the court sustains the Final Results in full.

I. Commerce's Adverse Inference that RZBC Benefited from the Buyer's Credit Program Lacks the Support of Substantial Evidence

In the underlying review, Commerce adversely inferred that RZBC benefited from the Buyer's Credit program, a concessional-loan program instituted by the Government of China ("GOC") owned EXIM Bank. I&D Mem. 75. The GOC and RZBC had represented that RZBC received no benefit from the program, but the GOC refused to allow Commerce to verify this representation by querying the EXIM Bank's internal database of financing information. Id. at 74. Accordingly, Commerce found that RZBC benefited from concessional loans offered under the Buyer's Credit program and ascribed an adverse interest rate of 10.54%. Id. at 74-76. RZBC argues that the GOC cooperated sufficiently at verification to preclude an application of "adverse facts available" ("AFA") premised on the GOC's failure to cooperate. RZBC further argues that, even if the GOC's cooperation was insufficient, Commerce unduly rejected the prospect of verifying non-use with RZBC, notwithstanding "neutral evidence on the record" indicating that RZBC did not use the Buyer's Credit program. Mem. of Law in Support of Pls.' Mot. for J. on the Agency R. Under USCIT Rule 56.2, at 22, ECF No. 29. Therefore, says RZBC, Commerce lacked grounds to adversely infer that RZBC drew benefit from the Buyer's Credit program. The court holds that Commerce's adverse inference lacks the support of substantial evidence.

A. Background

Commerce's application of AFA, or adverse inferences, is governed by the two-step analysis set forth in 19 U.S.C. § 1677e. First, Commerce is obligated to resort to "facts otherwise available" if the agency finds that "necessary information is not available on the record" or that an interested party or other person has withheld requested information, significantly impeded Commerce's proceeding, or provided information that Commerce must, but cannot, verify under 19 U.S.C. § 1677m(i). 19 U.S.C. § 1677e(a). Second, Commerce has discretion to draw an "inference that is adverse to the inferences of [a] party in selecting from among the facts otherwise available" if the agency "finds that [the] interested party has failed to cooperate by not acting to the best of its ability to comply with a request for information." Id. "Applying AFA" is shorthand for when Commerce makes affirmative findings under both steps of 19 U.S.C. § 1677e and as a result draws an adverse inference.

In CVD proceedings, Commerce will sometimes draw an adverse inference due to a foreign government's lack of cooperation in providing requested information, as opposed to a respondent's. See Archer Daniels Midland Co. v. United States (ADM I), 37 CIT ___, ___, 917 F. Supp. 2d 1331, 1342 (2013); GPX Int'l Tire Corp. v. United States, 37 CIT ___, ___, 893 F. Supp. 2d 1296, 1333 (2013); Fine Furniture (Shanghai) Ltd. v. United States, 36 CIT ___, ___, 865 F. Supp. 2d 1254, 1262 (2012). Such an inference might nonetheless collaterally effect a respondent, even though the respondent did nothing to incur the inference. ADM I, 37 CIT at ___, 917 F. Supp. 2d at 1342; GPX, 37 CIT at ___, 893 F. Supp. 2d at 1333; Fine Furniture, 36 CIT at ___, 865 F. Supp. 2d at 1262. Although these collateral effects can be excusable, Commerce must strive to avoid them by examining the record. ADM I, 37 CIT at ___, 917 F. Supp. 2d at 1342; GPX, 37 CIT at ___, 893 F. Supp. 2d at 1333; Fine Furniture, 36 CIT at ___, 865 F. Supp. 2d at 1262. "When Commerce has access to information on the record to fill in the gaps created by the lack of cooperation by the government, as opposed to [a respondent] . . . it is expected to consider such evidence." GPX, 37 CIT at ___, 893 F. Supp. 2d at 1333.

In the review at issue here, Commerce drew its adverse inference that RZBC benefitted from the Buyer's Credit program based on the GOC's failure to cooperate during a verification meeting. In a questionnaire response leading up to the verification meeting, the GOC had stated that it maintained a database of loans provided through the Buyer's Credit program, and that the database included the names of participating Chinese firms as well as their buyers. The GOC also stated that, to the best of its knowledge, none of RZBC's customers used the Buyer's Credit program. Commerce notified the GOC in the verification outline that the agency would seek on-site access to the EXIM Bank's database to confirm that none of RZBC's buyers were listed as beneficiaries of the Buyer's Credit program. I&D Mem. 74. At verification, representatives of the GOC orally reiterated that the EXIM Bank "maintains records of all lending provided under the program." Id. GOC representatives further stated that "they searched [the EXIM Bank] records and found no entry for any of the customers' names given to them by [RZBC]." Id. But the GOC refused Commerce the requested database access on grounds that "proper authorization" was required. GOC Verification Report 3, PD 207 (Oct. 8, 2014).

In lieu of database access, the GOC offered "screen shots of EXIM's query results," which Commerce's officials "declined...