Commerce Cannot Countervail Glass Since It's Not Input of Subject Merch, Exporter Tells CAFC
The Commerce Department cannot countervail glass purchases since both the Court of International Trade and Commerce have found that glass subsidies are not aluminum extrusions inputs, countervailing duty review respondent Guangzhou Jangho Curtain Wall System Engineering Co. argued in its Oct. 3 opening brief at the U.S. Court of Appeals for the Federal Circuit. Jangho also argued that CIT illegally allowed Commerce to make a post hoc rationalization as a basis for the finding to countervail glass subsidies (Taizhou United Imp. & Exp. Co. v. United States, Fed. Cir. 22-2000).
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The case concerns the 2013 administrative review of the CVD order on aluminum extrusions from China. The trade court initially sustained Commerce's position on nearly all the contested issues. Judge Leo Gordon, however, remanded the agency's decision to countervail subsidized purchases of glass and aluminum extrusions. On remand, Commerce continued to find that the glass purchases are countervailable, even though they weren't used in the subject aluminum extrusions. Gordon upheld this position in February, finding the glass input is countervailable (see 2202180042).
In response, five of the plaintiff-intervenors filed for relief from judgment and for rehearing on claims that Jangho says the court didn't address (see 2203070030). Jangho argued that even if Commerce can countervail glass, the record doesn't support Commerce's finding that the suppliers are government entities, a benefit was provided or any benefit was specific in nature. Gordon's ruled against Jangho in May (see 2205100076).
Appealing to the Federal Circuit, Jangho argued that Commerce's decision to countervail the purchase of glass below cost when the LTAR price is attributed to upstream subsidies violates the plain meaning of the law. Section 731(e) of the Tariff Act of 1930 says that an upstream subsidy must be tied to the production of the subject merchandise as an input or it cannot be countervailed. "However, the CIT and Commerce have now found that glass subsidies are not tied to the subject merchandise as inputs for aluminum extrusions," the brief said. "Therefore, glass purchases by Jangho cannot be countervailed according to the plain meaning of the statute’s text because glass is not an input for aluminum extrusions."
On remand at CIT, Commerce said that its benefit analysis looks at whether the respondent has been given a subsidy that confers a benefit to the company and not whether the benefit can be shown to flow directly to its production of subject merchandise. Jangho countered that Congress' "expressed intent is that an upstream subsidy should only be countervailed if it 'bestows a competitive benefit on the merchandise' and 'has a significant effect on the cost of manufacturing or producing the merchandise.'" Jangho does not make aluminum extrusions, so the glass it bought "does not bestow a competitive benefit on the manufacutre or production of aluminum extrusions," the brief said.
Further, the trade court illegally let Commerce make a post hoc rationalization as the basis for countervailing glass subsidies in its remand results, Jangho argued. On remand, the agency for the first time said that it based its decision on a finding that the subsidy was not tied to aluminum extrusions even though Commerce originally said that the alleged subsidy was tied to aluminum extrusions since it is an input to the extrusions, the brief said. Commerce said in its defense that this was permissible since it was Commerce and not DOJ that made this post hoc rationalization. "Post hoc rationalizations are not allowed to be offered by the Department of Commerce or the Department of Justice," the brief said.