Solar Cell Exporters Tell CAFC That Commerce Misapplied Anti-Circumvention Statute
Three different solar cell and module exporters recently filed their opening briefs at the U.S. Court of Appeals for the Federal Circuit in a pair of cases on the Commerce Department's findings that the antidumping duty and countervailing duty orders on Chinese solar cells and modules are being circumvented through Thailand and Cambodia (Trina Solar Science & Technology (Thailand) v. United States, Fed. Cir. # 25-1940) (BYD (H.K.) v. United States, Fed. Cir. # 25-1937).
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Exporters Trina Solar Science & Technology (Thailand) and Canadian Solar contested the anti-circumvention determination regarding Thailand, while exporter BYD (H.K.) challenged the determination regarding Cambodia. While the two cases differed in some respects, all three companies made claims against Commerce's application of the anti-circumvention statute's "minor or insignificant" standard, and the significant weight the agency placed on the research and development factor in making its affirmative circumvention findings.
The anti-circumvention statute compels Commerce to find a company is skirting an AD or CVD order when the firm's third-country operations are "minor or insignificant." Specifically, the statute, 19 U.S.C. 1677j(b)(2), lays out five factors the agency shall use to determine whether third-country operations are minor or insignificant.
The first four factors are the level of investment, level of R&D, nature of the production process and extent of production facilities in the third country. The last factor looks to whether the value of the processing performed in the third nation constitutes a "small proportion" of the value of the goods imported into the U.S.
In the Thai circumvention proceeding, Commerce heavily weighted the R&D factor, despite placing less importance on it in prior proceedings, due to its supposed preeminent importance in the solar industry. The Court of International Trade upheld the circumvention finding, rejecting Trina and Canadian Solar's claim that the agency had to find a majority of the circumvention factors weighed in favor of an affirmative finding (see 2505160045).
At the Federal Circuit, Trina and Canadian Solar said Commerce misapplied the "minor or insignificant" language in the statute. Canadian Solar emphasized the millions of dollars of investment made in the Thai solar cell industry as evidence of the agency's mistake, adding that the legislative history of the circumvention statute shows that Congress only meant to target "screwdriver operations." The exporter said its "Thailand operations are undoubtedly not 'minor or insignificant' screwdriver operations, whether measured quantitatively or qualitatively."
Canadian Solar added that Commerce's decision to make the R&D factor controlling was illegal, since "Congress has expressly directed that 'no single factor will be controlling.'" The exporter added that this decision was "particularly unlawful and untethered from the governing statute," since R&D is the "factor least associated with 'processing' in the third country."
Meanwhile, Trina argued that the weight afforded to the R&D factor was internally inconsistent. The agency said it was "placing dispositive weight" on the factor given that R&D "is most important to wafer production that is exclusively performed by the Chinese affiliates of the respondents and not preformed in any inquiry country," adding that wafer production is "significant to the solar industry." Trina said this claims is "inconsistent" with the agency's separate findings under the "nature of the production process" factor, which said "cell" production was critical to the industry.
Commerce used the same evidence to "reach two opposing conclusions, then applied such conclusions inconsistently under its required statutory analysis," the brief said. Canadian Solar emphasized that this analysis was illicitly "infected by affiliation considerations, which are a separate statutory issue." Commerce can't consider the R&D activities of "affiliated parties in China" as it did here, the brief said.
Canadian Solar additionally challenged Commerce's conclusion in regard to the value of the processing that occurred in Thailand, which accounted for around one-third of the value of the imported solar cells and modules. The exporter said the agency's conclusion that one-third constitutes a "small proportion" of the merchandise's value doesn't comport with "any reasonable definition" of the statutory term "small proportion."
Regarding the Cambodia circumvention proceeding, BYD argued that Commerce impermissible weighed the R&D prong in light of "significant value-added in Cambodia." The exporter said the agency likewise misinterpreted the phrase "minor or insignificant" and "elevated the required level of third-country investment, processing, and value-added far beyond what is required by the plain meaning of the statute."
BYD also challenged Commerce's use of surrogate values in the present case, claiming that the agency "has no statutory or factual basis for its departure from BYD HK’s actual books and records, which are inherently more accurate than the use of surrogate values."