United States Court of International Trade

Finding of Countervailable Subsidies Affirmed

In ATC Tires Private Ltd. and Alliance Tires America, Inc. v. United States Slip Op. 17-89, Court No. 17-00064 (June 25, 2018) the Court heard arguments about Commerce’s determinations in a countervailing duty investigation of certain pneumatic off-the-road tires from India. Specifically, plaintiffs argued that benefits associated with the Indian Export Oriented Unit (“EOU”) and Special Economic Zone (“SEZ “) programs were not countervailable subsidies. For the following reasons the Court sustained Commerce’s determinations in full. 

Commerce had “determined that the SEZ and EOU units are countervailable because there was a financial contribution and a benefit was conferred.” Id. at 8. Plaintiffs argued that the EOU/SEZ zones were located outside of the Indian Customs territory and because of this no revenue was lost by the India Government. Plaintiffs support their argument with evidence of Indian government monitoring mechanisms in place to ensure the zones operated outside of the Indian Customs territory.  The Court sustained Commerce’s determinations because companies operating in the zones were only exempt if they met a certain level of net foreign exchange “NFE”. If the company did not produce at this level, they were liable to the Indian government for duties, meeting the requirement for a benefit to be conferred.  In addition, the Court found Commerce’s determinations that the Indian government lacked sufficient monitoring systems to ensure that the SEZs and EOUs operated outside its customs territory to be supported by substantial evidence. In responses to Commerce’s questionnaires the Indian Government stated its programs did not “consider waste and consumption production factors or monitor waste and scrap and physical inspections are atypical.” Id. at 12. The Court said all of Commerce’s determinations were “consistent with Commerce’s prior finding.” Id. at 12.

Remand Results Sustained

In Government of Sri Lanka et al. v. United States, Court No. 17-59, Slip Op. 18-87 (July 11, 2018), the Court reviewed the remand results in a countervailing duty investigation of off-the road rubber tires from Sri Lanka.  In the “guaranteed price scheme” or GPS, the Government of Sri Lanka would “set an above-market ‘guaranteed price’ for rubber smallholders, calculate a ‘market price’ to be paid by purchasers, and assume responsibility for paying the difference between the ‘guaranteed price’ and the‘market price.’”  See Slip Op., pg 2 citing Sri Lanka I, 2018 WL 1831791, at *4. In some cases the government of Sri Lanka would reimburse the excess of the market price. Commerce found the entire value of these reimbursement payments to constitute a countervailable subsidy.

However, the Court found that the GPS program did not provide a benefit within the meaning of 19 U.S.C. 1677(5)(E) and remanded the matter for Commerce to eliminate the duties attributable to GPS based on reimbursement for excessive rubber payments.  On remand, Commerce removed the .95 percent duty attributed to the GPS program, reducing the de minimis overall duty rate to 1.23 percent.  Commerce declined to conduct a further investigation into whether the GPS program provided plaintiff-intervenor with an upstream subsidy or cognizable benefit.  The Court sustains the remand results.