CAFC Drops Pasta Exporter's AD Rate After CAFC Rebuke on Model-Match Methodology
The Commerce Department modified its model-matching methodology to incorporate changes to how it categorizes goods by protein content and nitrogen content, in the administrative review of the antidumping duty order on Italian pasta entered in 2018-19. Submitting remand results on Feb. 6 following a remand order from the U.S. Court of Appeals for the Federal Circuit, Commerce dropped respondent La Molisana's AD rate from 91.76%, which was based on adverse facts available, to 15.14% (La Molisana v. United States, CIT # 21-00291).
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
In a previous review of the AD order, Commerce sought to distinguish different types of pasta for a proper comparison of pasta sold in the U.S. to its domestic like product based on its protein content. The agency decided to use pasta's protein content as a proxy for its semolina quality, which indicates the quality of the pasta.
La Molisana challenged Commerce's methodology for determining pasta's protein content, arguing that it causes "dissimilar goods sold" in the U.S. and Italy to be treated as identical goods and "identical goods sold" in the U.S. and Italy to be treated as dissimilar. Following a defeat at the Court of International Trade on its challenge, the exporter found success at the CAFC (see 2506050021).
Specifically, the appellate court found that Commerce failed to account for the Food and Drug Administration's "mandated rounding rules on the protein content listed on the label" of U.S. pasta and the "different nitrogen-to-protein conversion factors used in calculating protein content" in the U.S. and Italy.
The FDA requires that labels for food include the number of grams of protein per serving, "expressed to the nearest gram." The court said when Commerce relied on rounded protein figures for pasta sold in the U.S. when comparing U.S. and Italian pasta, the agency failed "to compare products 'identical in physical characteristics' in violation of the" AD statute. The court rejected the agency's claim that a distinction between pasta with 12.5% or more protein versus pasta with under 12.5% protein isn't commercially significant.
The court also said the agency failed to consider differences in U.S. and Italian nitrogen conversion factors. The grams of protein in pasta is calculated by "multiplying the determined nitrogen content (nitrogen units) by a nitrogen-to-protein conversion factor." In the U.S., this conversion factor is 6.2510, while in Italy it's 5.7110.
On remand, Commerce issued a supplemental questionnaire to La Molisana to get information on how the company determines the actual protein and nitrogen content of its pasta products. In response, the exporter said the actual protein content is determined on a "product line basis," and it calculated the "actual protein content, measured in grams, and reported the resultant amount per kilogram of pasta, as well as the corresponding percentage of protein in the pasta, for each transaction in the databases."
The company derived the nitrogen content of its pasta "by using the reported protein content," reporting the "nitrogen content using the Italian conversion factor, and nitrogen content using the American conversion factor." Lastly, La Molisana reported revised protein codes and control numbers based on these methodologies.
Commerce found this information to be "sufficient for Commerce to match La Molisana’s sales of the foreign like product to its sales of subject merchandise with identical physical characteristics." The agency set three protein content fields, though it calculated the exporter's AD rate based on the field that "determines protein content for both markets based on the actual amount of protein, measured in grams."