Zhejiang Junyue Standard Part Co. v. United States

578 F.Supp.3d 1280

ZHEJIANG JUNYUE STANDARD PART CO., LTD., Plaintiff,andNingbo Zhongjiang High Strength Bolts Co., Ltd., Plaintiff-Intervenor,

v. UNITED STATES, Defendant,andVulcan Threaded Products, Inc., Defendant-Intervenor.

Slip Op. 22-50

Court No. 20-00102

United States Court of International Trade.

May 19, 2022

Alexandra H. Salzman, deKieffer & Horgan, PLLC, of Washington, D.C., argued for Plaintiff Zhejiang Junyue Standard Part Co., Ltd. With her on the brief were Gregory S. Menegaz and J. Kevin Horgan.

Kavita Mohan, Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP, of Washington, D.C., argued for Plaintiff-Intervenor Ningbo Zhongjiang High Strength Bolts Co., Ltd. With her on the brief were Andrew T. Schutz and Jordan C. Kahn.

Ashley Akers, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, D.C., argued for Defendant the United States. With her on the brief were Jeffrey Bossert Clark, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Tara K. Hogan, Assistant Director. Of counsel on the brief was Jesus N. Saenz, Attorney, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce, of Washington, D.C.

William A. Fennell, Schagrin Associates, of Washington, D.C., argued for Defendant-Intervenor Vulcan Threaded Products, Inc. With him on the brief were Roger B. Schagrin and Christopher T. Cloutier.

OPINION AND ORDER

Eaton, Judge:

This case involves the U.S. Department of Commerce's ("Commerce" or the "Department") final affirmative countervailing duty determination in its investigation of carbon and alloy steel threaded rod from the People's Republic of China ("China"). See Carbon and Alloy Steel Threaded Rod From the People's Republic of China , 85 Fed. Reg. 8,833 (Dep't Commerce Feb. 18, 2020) ("Final Determination") and accompanying Issues and Decision Mem. (Feb. 7, 2020) ("Final IDM"), PR 343; see also Carbon and Alloy Steel Threaded Rod From the People's Republic of China , 84 Fed. Reg. 36,578 (Dep't Commerce July 29, 2019) ("Preliminary Determination") and accompanying Prelim. Decision Mem. (July 22, 2019) ("PDM"), PR 220.

Before the court are the motions for judgment on the agency record of Plaintiff Zhejiang Junyue Standard Part Co., Ltd. ("Junyue") and Plaintiff-Intervenor Ningbo Zhongjiang High Strength Bolts Co., Ltd. ("Zhongjiang Bolts").¹ See Junyue's Mem. Supp. Mot. J. Agency R., ECF No. 27-2 ("Pl.’s Br."); Junyue's Reply Br., ECF No. 33. Junye and Zhongjiang Bolts (collectively, "Plaintiffs") are producers of subject merchandise that were individually investigated as mandatory respondents.

By their motions, Plaintiffs primarily challenge Commerce's use of adverse facts available to find that they each received a benefit under the Export Buyer's Credit Program—a government loan program in China. In particular, Plaintiffs question (1) whether substantial evidence supports Commerce's finding that the use of "facts otherwise available," under § 1677e(a), was required because "necessary" information about the operation of the Export Buyer's Credit Program was missing from the record; and if the use of facts available was justified, (2) whether substantial evidence supports Commerce's finding that Plaintiffs received a benefit under the program, where that finding was in direct conflict with declarations placed on the record by Plaintiffs, and (3) whether substantial evidence supports Commerce's application of an adverse inference, under § 1677e(b), when selecting from among the facts available because of China's failure to provide requested information about the program. See Pl.’s Br. at 6-16. Junyue also challenges Commerce's finding that its cross-owned affiliates—Affiliates A and B² —also benefitted from the Export Buyer's Credit Program, and its decision to triple the subsidy rate selected for the program, when calculating Junyue's countervailing duty rate, to account for the benefit received by (1) Junyue, (2) Affiliate A, and (3) Affiliate B. Accordingly, Plaintiffs ask the court to "declare that the Export Buyer's Credit Program must be excluded from [the Respondents’ respective countervailing duty] rate calculation[s]." See Pl.’s Br. at 22.

The United States ("Defendant") and Defendant-Intervenor and petitioner Vulcan Threaded Products, Inc. argue that Commerce's use of adverse facts available is supported by substantial evidence and is otherwise in accordance with law, and urge the court to sustain the Final Determination. See Def.’s Resp. Pls.’ Mots. J. Agency R., ECF No. 31 ("Def.’s Br."); see also Def.-Int.’s Opp'n Pls.’ Mots. J. Agency R., ECF No. 30 ("Def.-Int.’s Br.").

The court finds that substantial evidence does not support Commerce's use of adverse facts available to find that Plaintiffs benefitted from the Export Buyer's Credit Program. Additionally, the court finds that Commerce's decision to triple the subsidy rate selected for the program when calculating Junyue's rate to account for a benefit that the Department claims was received by Junyue's Affiliates A and B has not been explained adequately.

Thus, Commerce's inclusion of an adverse facts available rate for the program when calculating countervailing duty rates for Junyue and Zhongjiang Bolts cannot be sustained. The court thus remands Commerce's calculation of Junyue's and Zhongjiang Bolts’ individual countervailing duty rates to either (1) find a practical solution to verify the non-use information on the record, such as the reopening of the record to issue supplemental questionnaires to respondents and their U.S. customers (see infra note 10 ); or (2) recalculate the countervailing duty rates for Junyue and Zhongjiang Bolts to exclude the subsidy rate for the Export Buyer's Credit Program. On remand, should Commerce continue to attempt to justify its benefit determination as supported by substantial evidence and otherwise in accordance with law, it shall explain the tripling effect with specific citation to applicable statutes and substantial record evidence.

BACKGROUND

The Export Buyer's Credit Program is a state-subsidized loan program, administered by China's state-owned Export Import Bank. See Clearon Corp. v. United States , 44 CIT ––––, ––––, 474 F. Supp. 3d 1339, 1341 n.5 (2020). Under the program, the Chinese government provides credit at preferential rates to foreign purchasers of goods exported by Chinese companies. See id. at ––––, 474 F. Supp. 3d at 1341 n.5 ; see also Final IDM at 37.

As with other cases involving the Export Buyer's Credit Program that have come before this Court, the record in this case shows that Commerce sent initial and supplemental questionnaires to China, asking for information that, for Commerce, would allow it to fully understand the operation of the program. Commerce asked for copies of revisions that the Export Import Bank made in 2013 to its internal guidelines for administering the program, and the identities of third-party banks involved in the disbursement of buyer's credits.³ See Final IDM at 32; see also Clearon , 44 CIT at ––––, 474 F. Supp. 3d at 1350-51 & nn.10-12 (collecting cases).

As in prior cases, here China provided some, but not all, of the information that Commerce requested. Specifically, China failed to provide "the 2013 Revisions [to the Export Buyer's Credit Program], a list of all third-party banks involved in the disbursement/settlement of export buyer's credits, and a list of all partner/correspondent banks involved in disbursement of funds under" the program. Final IDM at 32. Instead of providing the requested information, China responded that Commerce's requests for information were "not applicable" and "unnecessary." In place of the information requested, China provided, among other things, screenshots of the results of searches of the China Export Import Bank's databases that purported to show that there was no record of any Export Buyer's Credit Program loans being disbursed to Junyue's or Zhongjiang Bolts’ U.S. customers during the period of investigation. See Final IDM at 31-34.

For their part, Junyue and Zhongjiang Bolts stated in their questionnaire responses that neither company had benefitted from the program during the period of investigation. In addition, they placed on the record declarations from their U.S. customers stating that they had not used export buyer's credits during the period of investigation.⁴ See Final IDM at 33-34.

Commerce conducted verification in China, but it did not attempt to verify evidence of usage of the Export Buyer's Credit Program provided by the Chinese government. According to Commerce, it "no longer attempts to verify usage of the [Export Buyer's Credit] program with [China] given the inadequate information provided in its questionnaire responses, in particular, [China's] refusal to provide the 2013 revisions to the administrative rules." See Final IDM at 33 n.236; see also 19 U.S.C. § 1677m(i)(1) (2018) (Commerce "shall verify all information relied upon in making ... a final determination in an investigation.").

Nor did Commerce verify, or attempt to verify, Junyue's and Zhongjiang Bolts’ claims their U.S. customers did not use the Export Buyer's Credit Program. See, e.g. , Junyue Verification Rep. (Dec. 2, 2019), PR 330; Zhongjiang Bolts Verification Rep. (Dec. 2, 2019), PR 329.

The Department's decision not to attempt verification of Plaintiffs’ claims of non-use of the Export Buyer's Credit Program at Junyue's and Zhongjiang Bolts’ offices in China, or those of their U.S. customers, rested on Commerce's finding that the operational information that China failed to provide—i.e. , the 2013 revisions to the program and the identities of third-party banks—was "necessary." Final IDM at 34. For Commerce, its "typical non-use verification procedure" could not be employed to verify the claims of non-use without this "necessary" operational information.⁵

Commerce deemed the program's operational information "n...