United States Court of International Trade

Redetermination in Eight Administrative Review Remanded in Part

In Vinh Hoan Corporation et al. v. United States, Court No. 13-156, Slip Op. 16-53 (published June 3, 2016), the court had remanded Commerce’s final determination in the eighth administrative review of the antidumping duty order covering certain frozen fish fillets from the Socialist Republic of Vietnam (“Vietnam”) for Commerce to reconsider and provide further explanation regarding its: (1) surrogate country selection; (2) determination to decline to adjust Vinh Hoan’s margin calculation to exclude glazing weight; and (3) treatment of all of Plaintiff Vinh Hoan Corporation’s (“Vinh Hoan”) sales to one customer as consignment sales where record evidence indicated they were not consignment sales. This decision reviewed the remand redetermination. 

For purposes of the surrogate country selection, there was nothing to suggest that Indonesia as the surrogate country was not economically comparable to Vietnam. Further, because the IAS data from Indonesia was more reliable, Commerce applied it rather than the DAM Data from Bangladesh. Commerce found the Indonesian financial statements from Indonesian PT Dharma Samudera Fishing Industries (“DSFI”) superior to the Bangladeshi alternatives because DSFI produces comparable merchandise, i.e., frozen fish fillets, whereas Apex and Gemini do not primarily produce frozen fish fillets. As for non-fish factors of production (FOPs),  Commerce reviewed each of the inputs and explained its reasoning. With regard to frozen broken meat and fish oil, Commerce had only two surrogate value sources before it, which are both from Indonesia. For fresh broken meat, foreign brokerage and handling, inland freight, rice husk, fish waste, fish belly, fish skin, and fish meal, Commerce conceded that it did not rely upon its selection of surrogate value data. For this reason, the court remanded its reasoning for using other data for these factors.

In regards to consignment sales, Commerce decided to treat only sales from Vinh Hoan’s customer that entered cold storage pursuant to a consignment arrangement as consignment sales. Thus, on remand, Commerce applied the “credit expenses and inventory carrying costs solely to Vinh Hoan’s consignment sales to the customer with which it had a consignment agreement.” No party commented on or challenged Commerce’s decision on remand, and thus this determination was sustained.

As for Vinh Hoan’s margin calculations to exclude glazing weight, Commerce reconsidered Vinh Hoan’s gross weight denominator, i.e., inclusive of glazing, for FOP usage ratios and found that it “should recalculate Vinh Hoan’s margin using the net weight denominator.” Commerce thus reopened the record for Vinh Hoan to submit a revised FOP database using the net quantity denominator. Commerce used this revised database to calculate Vinh Hoan’s margin on a net weight basis on both the normal value and export price sides of its margin calculations.  Thus, the court found this determination to be supported by substantial evidence.

As for further issues regarding fish oil byproducts, although the court did not say Commerce unreasonably determined that Vinh Hoan’s fish oil was a low value-added product,  the court determined that Commerce had not explained why it was reasonable to depart from its normal methodology of choosing the best SV data source to value respondents’ fish oil byproduct.   Furthermore Commerce was asked to reconsider its calculations concerning Vinh Hoan’s byproduct offsets.  Thus both these portions of thee determinations are remanded.

For these reasons, the court remanded the redetermination in part. 

Commerce Used Improper and Inconsistent Rule of Origin in Solar Cell Investigations

The Commerce Department cannot apply inconsistent country of origin rules to a single “class or kind” of merchandise in two different antidumping or countervailing duty proceedings, the Court of International Trade said in a significant recent ruling.

Sunpower Inc. v. United State, Slip Op. 15-56 (June 8, 2016) examined the scope of a second antidumping and countervailing duty petition filed by domestic producers of solar panels and cells. In an earlier proceeding, the domestic producers sought antidumping and countervailing duties in respect of Chinese-origin solar cells and panels, as well as solar panels assembled in other countries using Chinese-made solar cells. The rationale was that the production of solar cells was the most significant manufacturing or production operation, while the assembly of cells into panels was a simple operation which did not change the country of origin.

After the AD and CVD orders issued in Solar Cells I, the domestic industry noticed activity which, it believed, exploited a loophole in the scope of the original order. Specifically, Taiwanese firms would ship solar cells of Taiwanese origin to China, where they would be assembled into solar panels that were not subject to the Solar Cells I order.  To address this problem, the domestic industry filed two new antidumping petitions, one seeking the assessment of ADs ad CVDs on solar cells produced in Taiwan (Solar II Taiwan), and the second seeking ADs and CVDs on solar panels assembled in China, regardless of the origin of the solar cells used in the operation.

Following investigation by the Commerce Department, antidumping and countervailing duty orders were issued in Solar II Taiwan and Solar II China.

Several producers and importers of Solar Cells assembled in China challenged the Commerce Department’s analysis regarding the scope of Solar II China. The agency had used an inconsistent country of origin rule to identify the origin of solar panels, they charged. In Solar I China and Solar II Taiwan, the production of the solar cells, which contributed the bulk of the cost and value to the solar panels, was identified as the “origin conferring” operation. However, in Solar II China, the relatively insubstantial process of assembling cells into panels was deemed sufficient to identify the resulting panels as “Chinese” for antidumping and countervailing duty purposes.

Senior Judge Donald Pogue ruled that Commerce had improperly departed from its prior practice of identifying the country of origin of solar panels without providing a reasoned explanation. He noted that the antidumping and countervailing duty laws subjected goods to special duties based on (1) a “class or kind of merchandise” and (2) a country of origin.  The origin determination was essential to the process, he said, because it determined which home market country’s pricing or subsidy behavior would be examined to determine the existence of unfair trade practices. He suggested that it was anomalous to impose special duties on the entire value of a solar panel produced in China, when only a small percentage of its value was derived in that country.  He also noted that the decisions in Solar Cells II Taiwan and Solar Cells II China, although reached simultaneously, employed different and inconsistent rules of origin to determine the scope of the order.

Finding that Commerce had failed properly to consider “an important aspect of the question” before it, the Court remanded the determination to Commerce, with instructions for the agency to provide an explanation of reasoning for the differing origin rules used.

Note:   The decision ultimately reached in this case may have a far-reaching impact regarding a number of antidumping and countervailing duty investigations currently underway. In response to recent decisions in the case of Bell Supply Co. v. United States, [See Slip Op. 16-41], which questioned Commerce’s Power to use “scope determinations” to extend antidumping and countervailing duty orders to products of “third countries”, where the order itself if silent on third party coverage, Commerce has begun inserting, on its own initiative, scope language in a number of pending investigations which purport to cover goods produced in the countries named in the investigation, as well as products made in un-named countries from “in-scope” goods. The scope language which Commerce has inserted into ongoing investigations, including several pending investigations on steel products, would cause resulting orders to cover goods produced in un-named countries using processes which have been recognized as effecting a “substantial transformation” and conferring a new country of origin. However, no investigations are being conducted of goods imported from those unnamed countries.