Court Opinion

ID: 4569908
Source: CourtListenerOpinion
Date Created: 2020-09-25 18:01:45.482297+00
Date Added: 2024-06-11T13:27:33.087830
License: Public Domain

Slip Op. 20-138

                    UNITED STATES COURT OF INTERNATIONAL TRADE

TAIZHOU UNITED IMP. & EXP. CO. LTD.,

                           Plaintiff,

              and

GUANGZHOU JANGHO CURTAIN WALL SYSTEM
ENGINEERING CO., LTD., JANGHO GROUP CO.,
LTD., BEIJING JIANGHEYUAN HOLDING CO.,
LTD., BEIJING JANGHO CURTAIN WALL SYSTEM
ENGINEERING CO., LTD., JANGHO CURTAIN                      Before: Leo M. Gordon, Judge
WALL HONG KONG LTD., SHANGHAI JANGHO
CURTAIN WALL SYSTEM ENGINEERING CO.,
LTD.,
                                                           Consol. Court No. 16-00009
                           Consolidated Plaintiffs,
              v.

UNITED STATES,
                           Defendant,

              and

ALUMINUM           EXTRUSIONS           FAIR    TRADE
COMMITTEE,

                           Defendant-Intervenor.

                                 OPINION and ORDER

[Final Results sustained in part and remanded in part.]

                                                          Dated: September 25, 2020

     Douglas J. Heffner and Richard P. Ferrin, Drinker Biddle & Reath LLP of
Washington, DC, for Plaintiff Taizhou United Imp. & Exp. Co. Ltd.
Consol. Court No. 16-00009                                                           Page 2

        James Kevin Horgan, Alexandra H. Salzman, Gregory Stephen Menegaz, and
John Joseph Kenkel, deKieffer & Horgan, PLLC of Washington, DC, for Consolidated
Plaintiffs Guangzhou Jangho Curtain Wall System Engineering Co., Ltd., Jangho Group
Co., Ltd., Beijing Jiangheyuan Holding Co., Ltd., Beijing Jangho Curtain Wall System
Engineering Co., Ltd., Jangho Curtain Wall Hong Kong Ltd. and Shanghai Jangho Curtain
Wall System Engineering Co., Ltd.

       Douglas G. Edelschick, Senior Trial Counsel, Commercial Litigation Branch, Civil
Division, U.S. Department of Justice of Washington, DC, for Defendant United States.
With him on the brief were Jeffrey Bossert Clarke, Assistant Attorney General,
Jeanne E. Davidson, Director, and Reginald T. Blades Jr., Assistant Director. Of counsel
on the brief was Kirrin Hough, Attorney, U.S. Department of Commerce, Office of the
Chief Counsel for Trade Enforcement and Compliance of Washington, DC.

     Alan H. Price, Robert E. DeFrancesco, III, and Elizabeth S. Lee, Wiley Rein LLP
of Washington, DC, for Defendant-Intervenors Aluminum Extrusions Fair Trade
Committee.

      Gordon, Judge: This action involves the final results of the 2013 administrative

review conducted by the U.S. Department of Commerce (“Commerce”) of the

countervailing duty (“CVD”) order on aluminum extrusions from the People’s Republic of

China (“PRC”). See Aluminum Extrusions From the People’s Republic of China, 80 Fed.

Reg. 77,325 (Dep’t of Commerce Dec. 14, 2015) (final results admin. rev.) (“Final

Results”); see also accompanying Issues and Decision Memorandum, C-570-968 (Dep’t

of        Commerce            Dec.          7,        2015),          available           at

https://enforcement.trade.gov/frn/summary/prc/2015-31425-1.pdf                    (“Decision

Memorandum”); Aluminum Extrusions from the People’s Republic of China, 76 Fed. Reg.

30,653 (Dep’t of Commerce May 26, 2011) (“CVD Order”).

      Before the court are the USCIT Rule 56.2 motions for judgment on the agency

record filed by Plaintiff Taizhou United Imp. & Exp. Co. Ltd. (“Taizhou”) and Consolidated
Consol. Court No. 16-00009                                                           Page 3

Plaintiffs Guangzhou Jangho Curtain Wall System Engineering Co., Ltd., Jangho

Group Co., Ltd., Beijing Jiangheyuan Holding Co., Ltd., Beijing Jangho Curtain Wall

System Engineering Co., Ltd., and Shanghai Jangho Curtain Wall System Engineering

Co., Ltd. (collectively, “Jangho”). See Pl.’s Mem. in Supp. of its 56.2 Mot. for J. on the

Agency R., ECF No. 80; Consolidated PI’s Mem. In Supp. of its Mot. For J. on the Agency

R., ECF No. 82-1 (“Jangho Br.”); see also Def.'s Resp. in Opp'n to Pl.'s Mot. for J. on the

Agency R., ECF No. 88 (“Def.'s Resp.”); Def.-Intervenors’ Resp. in Opp’n to Pl.’s Mot. for

J. on the Agency R., ECF No. 89; Pl. Taizhou’s Reply Br., ECF No. 92; Consolidated PIs.’

Reply Br., ECF No. 93 (“Jangho Reply”). 1 The court has jurisdiction pursuant to Section

516A(a)(2)(B)(iii) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1516a(a)(2)(B)(iii) 2,

and 28 U.S.C. § 1581(c) (2012). For the reasons set forth below, the court grants

Plaintiffs’ motions as to Commerce’s determinations to countervail subsidized purchases

of glass and aluminum extrusions, and remands the Final Results to Commerce;

however, the court sustains the Final Results as to all other issues raised by Plaintiffs.

1
  In July 2020, approximately three months after the conclusion of briefing the USCIT
Rule 56.2 motion for judgment on the agency record, Jangho replaced their former
counsel at Sandler, Travis & Rosenberg, PA with their current counsel. See ECF No. 96
(Form 12 Substitution of Attorney filed by J. Kevin Horgan to appear in place of Kristen
S. Smith).
2
  Further citations to the Tariff Act of 1930, as amended, are to the relevant provisions of
Title 19 of the U.S. Code, 2012 edition.
Consol. Court No. 16-00009                                                           Page 4

                                   I.     Background

      Initially, Plaintiffs’ claims included challenges to whether their products fell within

the scope of the CVD Order. See Mem. In Supp. of Jangho’s Mot. for J. on the Agency

R. at 11–24, ECF No. 47. To promote judicial efficiency, the court stayed briefing in this

action pending the resolution of Guangzhou Jangho Wall Sys. Eng’g Co. v. United States,

Court Nos. 15-00023 & 15-00024, which involved identical challenges to the scope of

Commerce’s antidumping (“AD”) and CVD Orders arising out of the second administrative

review. See Order Granting Stay, ECF No. 63.

      Under 19 C.F.R. § 351.225, an interested party may apply for a ruling from

Commerce as to whether a particular product is within the scope of a CVD order. See

19 C.F.R. § 351.225. Yuanda USA Corporation and Shenyang Yuanda Aluminum

Industry Engineering Co., Ltd. (collectively “Yuanda”) requested a scope inquiry for its

curtain wall units produced in the PRC, and Commerce issued a formal scope ruling that

Yuanda’s curtain wall units fell within the scope of the order. See Aluminum Extrusions

from the PRC, A-570-967 & C-570-968 (Dep't of Commerce Mar. 27, 2014) (final scope

ruling on curtain wall units produced and imported pursuant to contract to supply curtain

wall), available at https://enforcement.trade.gov/download/prc-ae/scope/38-curtain-wall-

units-7apr14.pdf ("Yuanda Scope Ruling").

      Yuanda, and other foreign producers/exporters and importers of substantially

identical curtain wall units (including Jangho), challenged the Yuanda Scope Ruling

before this Court and the U.S. Court of Appeals for the Federal Circuit. See Shenyang
Consol. Court No. 16-00009                                                               Page 5

Yuanda Aluminum Eng’g Co. v. United States, 41 CIT ___, 279 F. Supp. 3d 1209 (2017),

aff’d, 918 F.3d 1355 (Fed. Cir. 2019). In sustaining the Yuanda Scope Ruling, the Federal

Circuit held that “curtain wall units . . . imported under a contract for an entire curtain wall”

are within the scope of the AD and CVD orders covering aluminum extrusions from the

PRC. See Shenyang Yuanda, 918 F.3d at 1358, 1368. Following the Federal Circuit’s

decision in Shenyang Yuanda, Plaintiffs sought and obtained voluntary dismissals of their

complaints in Court Nos. 15-00023 & 15-00024. See Order of Dismissal under USCIT

R. 41(a)(1)(A)(ii), Court No. 15-00023, ECF No. 85; Order of Dismissal under USCIT

R. 41(a)(1)(A)(ii), Court No. 15-00024, ECF No. 83. In this action, Plaintiffs withdrew their

arguments related to scope, filed amended complaints, and the instant USCIT Rule 56.2

motions for judgment on the agency record. See Joint Status Report & Proposed Briefing

Schedule at 2, ECF No. 72.

       Plaintiffs challenge various aspects of Commerce’s determinations in the Final

Results. First, Plaintiffs contend that Commerce unlawfully suspended Plaintiffs’ entries

of subject merchandise prior to Commerce’s initiation of a formal scope inquiry. See

Jangho Br. at 9. Plaintiffs also contend that Commerce unreasonably found that they

benefitted from countervailable subsidies in the form of various preferential loans, tax

policies, and tax offsets. Id. at 16–20. Plaintiffs further argue that Commerce

unreasonably determined that glass and aluminum extrusions purchased for less than

adequate remuneration (“LTAR”) may be countervailed as inputs to the subject

merchandise. Id. at 20–28. Alternatively, Plaintiffs maintain that even if Commerce may
Consol. Court No. 16-00009                                                       Page 6

lawfully countervail glass and aluminum extrusion inputs to the subject merchandise, “the

administrative record provides no support for Commerce’s arbitrary finding that suppliers

are ‘government entities,’ that a benefit was indeed provided or that any alleged benefit

was specific in nature, as required by the CVD statute.” Id. at 28–38.

                              II.    Standard of Review

      The court sustains Commerce’s “determinations, findings, or conclusions” unless

they are “unsupported by substantial evidence on the record, or otherwise not in

accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i). More specifically, when reviewing

agency determinations, findings or conclusions for substantial evidence, the court

assesses whether the agency action is reasonable given the record as a whole. Nippon

Steel Corp. v. United States, 458 F.3d 1345, 1350–51 (Fed. Cir. 2006). Substantial

evidence has been described as “such relevant evidence as a reasonable mind might

accept as adequate to support a conclusion.” DuPont Teijin Films USA v. United States,

407 F.3d 1211, 1215 (Fed. Cir. 2005) (quoting Consol. Edison Co. v. NLRB, 305 U.S.
197, 229 (1938)). Substantial evidence has also been described as “something less than

the weight of the evidence, and the possibility of drawing two inconsistent conclusions

from the evidence does not prevent an administrative agency’s finding from being

supported by substantial evidence.” Consolo v. Fed. Mar. Comm’n, 383 U.S. 607, 620

(1966).

      Fundamentally, though, “substantial evidence” is best understood as a word

formula connoting reasonableness review. 3 Charles H. Koch, Jr. Administrative Law and
Consol. Court No. 16-00009                                                         Page 7

Practice § 9.24[1] (3d ed. 2020). Therefore, when addressing a substantial evidence issue

raised by a party, the court analyzes whether the challenged agency action “was

reasonable given the circumstances presented by the whole record.” 8A West’s Fed.

Forms, National Courts § 3.6 (5th ed. 2020).

                                    III.   Discussion

A.     Countervailing Duty of Aluminum Extrusions and Glass “Inputs” in Subject
                                     Merchandise

       Plaintiffs argue that Commerce lacks the authority to countervail subsidies to glass

and aluminum extrusions as “inputs” to the subject merchandise. See Jangho Br.

at 20-28. With respect to Commerce’s decision to countervail glass subsidies, Plaintiffs

argue that glass is outside of the scope of the CVD Order. Id. at 22. Plaintiffs highlight

that the language of the CVD Order expressly excludes from the scope of the order

“the non-aluminum extrusion components of subassemblies or subject kits.” Id. at 24

(quoting CVD Order, 76 Fed. Reg. at 30,653–54). Plaintiffs also contend Commerce

lacked the authority to countervail aluminum extrusions. Id. at 27. Plaintiffs argue that

aluminum extrusions may not be countervailed because aluminum extrusions are the

subject merchandise, not an input used in the manufacture of subject merchandise. Id.

Plaintiffs note that although Commerce found that curtain wall units are subject to the

scope of the order in Yuanda Scope Ruling, only the aluminum extrusions contained in

curtain wall units constitute subject merchandise. Id. at 28.
Consol. Court No. 16-00009                                                             Page 8

       Commerce found that parts of curtain walls, including curtain wall units, are

included within the scope of the order. See Decision Memorandum at 96. Commerce does

not dispute that it generally does not countervail subsidies tied to non-subject

merchandise. Id. at 97. However, Commerce rejected Plaintiffs’ arguments that glass is

outside of the scope of the CVD Order, explaining:

              curtain wall units such as those produced by the Jangho
              Companies are considered subject merchandise. In other
              words, subject curtain wall units containing glass is a single
              commercial product. Glass is therefore an input used in the
              manufacture of subject merchandise, i.e., curtain wall units.
Id. at 97–98. Commerce thus found that it could countervail subsidies to glass inputs of

curtain wall units, as the benefits derived from the purchase of glass for LTAR are tied to

subject merchandise. Id.

       Curtain wall units are subassemblies of curtain walls. See Shenyang Yuanda

Aluminum Eng’g Co. v. United States, 918 F.3d 1355, 1367 (Fed. Cir. 2019) (“The only

remaining issue for the curtain wall unit entries at issue here is whether they are excluded

when viewed (correctly) as subassemblies. We see no error in Commerce’s conclusion

that they are not so excluded.”); see also Shenyang Yuanda Aluminum Eng’g Co. v.

United States, 776 F.3d 1351, 1358 (Fed. Cir. 2015) (“curtain wall units are undeniably

components that are fastened together to form a completed curtain wall. Thus, they are

‘parts for,’ and ‘subassemblies' for, completed curtain walls. A part or subassembly, here

a curtain wall unit, cannot be a finished product.” (internal citation and quotation omitted)).
Consol. Court No. 16-00009                                                           Page 9

       As subassemblies, curtain wall units are subject to the exclusion of their non-

aluminum extrusion components from the order: “The scope does not include the non-

aluminum extrusion components of subassemblies.” CVD Order, 76 Fed. Reg. at 30,654.

Commerce’s conclusion that “a curtain wall unit is subject merchandise, inclusive of

aluminum extrusions, glass, and all other components” unreasonably contravenes the

plain language of the order. See Decision Memorandum at 100. The scope of the order

covers aluminum extrusions, not glass, and the CVD Order expressly excludes the non-

aluminum extrusion components of subassemblies like curtain wall units. It is therefore

arbitrary to conclude the glass is subject merchandise. By the scope’s definition, it is not.

This is not arguable or subject to interpretation. The scope is clear. Commerce must abide

by the clear scope language. The court will therefore remand this issue for Commerce to

correct its analysis of the non-aluminum extrusion components of the curtain wall units.

Those are not subject merchandise.

       The more interesting question is Commerce’s treatment of the aluminum

extrusions component of the curtain wall units. Commerce countervailed the aluminum

extrusion component as an input of the curtain wall unit. Id. That has a facial appeal if

one erroneously concludes the subject merchandise is the curtain wall unit. The subject

merchandise, however, is the aluminum extrusion component of the curtain wall units.

To be clear, the subject merchandise is a curtain wall unit, which is a subassembly of a

curtain wall, and does not include the non-aluminum extrusion components, which leaves,

unsurprisingly, aluminum extrusions. It does ring pretty hollow to conclude that aluminum
Consol. Court No. 16-00009                                                           Page 10

extrusions are inputs for aluminum extrusions. The court cannot sustain that as

reasonable. Commerce therefore needs to rethink its treatment of the aluminum

extrusions in the curtain wall units, and how best to fully capture their subsidization. The

court does understand that it is possible to subsidize the aluminum extrusions as an input

for the curtain wall unit, and separately subsidize the curtain wall units. It is also possible

in that scenario to double count the aluminum extrusion subsidies and overcompensate

on the trade remedy. The hope is that on remand, Commerce can sort this out and

determine the appropriate countervailable measures for the subject merchandise,

aluminum extrusions.

    B.      Statutory Requirements for Countervailing Subsidies for Aluminum
                              Extrusions and Glass

       Because the court remands Commerce’s determination that it may countervail

glass and aluminum extrusions as inputs to the subject merchandise, see Section A

supra, the court does not reach Plaintiffs’ alternative arguments as to whether Commerce

reasonably found that the statutory requirements of § 1677(5) were met with respect to

Plaintiffs’ aluminum extrusion and glass purchases. See Jangho Br. at 28–38.

  C.      Suspension of Plaintiffs’ Entries and Application of 19 C.F.R. § 351.225

       19 C.F.R. § 351.225 “contains rules regarding scope rulings, requests for scope

rulings, procedures for scope inquiries, and standards used in determining whether a

product is within the scope of an order or suspended investigation.” See 19 C.F.R.
Consol. Court No. 16-00009                                                          Page 11

§ 351.225(a). Plaintiffs contend that the suspension of liquidation of their entries in this

matter violated § 351.225(l)(3), which provides:

              If the Secretary issues a final scope ruling, under either
              paragraph (d) or (f)(4) of this section, to the effect that the
              product in question is included within the scope of the order,
              any suspension of liquidation under paragraph (l)(1) or (l)(2)
              of this section will continue. Where there has been no
              suspension of liquidation, the Secretary will instruct the
              Customs Service to suspend liquidation and to require a cash
              deposit of estimated duties, at the applicable rate, for each
              unliquidated entry of the product entered, or withdrawn from
              warehouse, for consumption on or after the date of initiation
              of the scope inquiry. If the Secretary's final scope ruling is to
              the effect that the product in question is not included within
              the scope of the order, the Secretary will order any
              suspension of liquidation on the subject product ended and
              will instruct the Customs Service to refund any cash deposits
              or release any bonds relating to this product.

19 C.F.R. § 351.225(l)(3).

       Plaintiff argues that “[b]ecause Commerce did not suspend liquidation of ‘curtain

wall units that are produced and imported pursuant to a contract to supply a curtain wall’

prior to the initiation of the formal scope inquiry, entries of those products cannot be

suspended retroactively before that date” pursuant to this regulation. See Jangho Br.

at 9–15. Plaintiffs note that Commerce’s liquidation instructions in the Yuanda Scope

Ruling specifically directed U.S. Customs and Border Protection (“Customs” or “CBP”) to

“suspend liquidation of entries of curtain wall units that are produced and imported

pursuant to a contract to supply a curtain wall effective 5/10/2013, which is the date of the

initiation of the scope inquiry”. Id. at 10. Plaintiffs maintain that based on these
Consol. Court No. 16-00009                                                          Page 12

instructions, entries of curtain wall units prior to May 10, 2013 should be excluded from

suspension in the underlying administrative review. Id.

       Commerce found the regulation was not applicable to the subject merchandise and

rejected Plaintiffs’ argument. See Decision Memorandum at 78–80. Specifically,

Commerce noted that Plaintiffs’ recitation of § 351.225(l)(3) omitted the key words

“[w]here there has been no suspension of liquidation.” Id. at 79. Commerce explained that

“[t]he Jangho Companies’ relevant entries were suspended prior to the date of initiation

of the curtain wall units scope ruling,” and the agency thus concluded that “[n]othing in

19 CFR 351.225(l)(3) prohibits CBP from suspending liquidation of these entries prior to

the initiation of a scope inquiry.” Id. Commerce thus concluded that, contrary to Plaintiffs’

arguments, “the Department has not retroactively ordered the suspension of liquidation

of any entries of the Jangho Companies’ merchandise, although such merchandise may

already have been properly suspended by CBP. … [T]he in-scope status of the Jangho

Companies’ curtain wall units and other curtain wall components and products subject to

this review has been confirmed by the Department’s scope ruling, by the CIT, and by the

Federal Circuit in Shenyang Yuanda v. United States.” Id. at 79–80. Accordingly,

Commerce determined that the continued suspension of liquidation of the subject

merchandise was proper. Id.

       Plaintiffs argue that Commerce’s interpretation of § 351.225(l)(3) is too simplistic,

and that the existence of a pre-existing administrative review “does not free Commerce

from adhering to the Yuanda Scope Ruling.” Id. at 13.               Plaintiffs contend that
Consol. Court No. 16-00009                                                          Page 13

§ 351.225(l)(3) limits when Commerce can suspend liquidation of entries that were

subject to a final scope ruling. Id. at 13–14.

       Commerce explained that “suspension of entries of curtain wall parts began at the

date of the preliminary determination in the countervailing duty investigation and properly

continued through the completion of the relevant scope inquiry on curtain wall units

pursuant to 19 C.F.R. § 351.225(l)(1) and (3).” See Decision Memorandum at 80.

Commerce disagreed with Plaintiffs’ contention that the agency “retroactively assessed

duties on Jangho’s entries,” and explained that “curtain wall parts are, and always have

been, subject to the CVD order.” Id. (citing Aluminum Extrusions from the People’s

Republic of China, 75 Fed. Reg. 54,302, 54,303 (Dep’t of Commerce Sept. 7, 2010)

(prelim.   determ.   CVD     investigation)    (“Preliminary   Determination”)).   Commerce

emphasized the limiting language, “[w]here there has been no suspension of liquidation,”

in § 351.225(l)(3), and determined that the regulation did not limit Commerce’s authority

to suspend liquidation of Plaintiffs’ entries. Id.

       The court agrees with Commerce that the agency’s suspension of liquidation of

Plaintiffs’ entries did not violate § 351.225(l)(3) for the reasons provided in the Decision

Memorandum. Plaintiffs’ arguments focusing on the language of Commerce’s liquidation

instructions and highlighting precedent where Commerce was not permitted to

retroactively suspend liquidation of entries, see Jangho Br. at 11–12, ignore the crucial

distinguishing fact in this matter that Plaintiffs’ entries were lawfully suspended pursuant

to the Preliminary Determination prior to the May 2013 Yuanda Scope Ruling.
Consol. Court No. 16-00009                                                          Page 14

See Decision Memorandum at 79–80. The court agrees that because Plaintiffs’ entries

were already lawfully suspended at the time of the Yuanda Scope Ruling, § 351.225(l)(3)

did not limit the Government’s authority to continue suspending those entries.

Accordingly, the court rejects Plaintiffs’ arguments that the suspension of liquidation of

entries of subject merchandise prior to the issuance of the Yuanda Scope Ruling violated

§ 351.225(l)(3).

              D.     Application of 19 U.S.C. § 1677(5)(B) to PRC Banks

       Under 19 U.S.C. § 1677(5) there are four requirements that Commerce must find

in order to determine that a foreign program constitutes a countervailable subsidy.

Specifically, in order to find a “subsidy” Commerce must find that an “authority” provided

a “financial contribution” in which a “benefit” is conferred. See 19 U.S.C. § 1677(5). Each

of these terms is defined in the statute. See 19 U.S.C. § 1677(5)(B)(iii) (defining

“authority”); 19 U.S.C. § 1677(5)(D) (defining “financial contribution”); 19 U.S.C.

§ 1677(5)(E) (defining when a “benefit” is “conferred”). Additionally, in order for a subsidy

to be countervailable under the statute, Commerce must find that the subsidy is “specific”

under the criteria set forth in § 1677(5A).

       Plaintiffs contend that Commerce erroneously found that PRC banks constitute

“authorities” as defined in § 1677(5)(B)(iii). Jangho Br. at 16–19. Plaintiffs maintain that

“the underlying administrative record demonstrates that banks made lending decisions

based upon sound commercial considerations, not government policy goals.” Id. at 16.

Jangho argues that Chinese banks operate based on rules and regulations that require
Consol. Court No. 16-00009                                                        Page 15

them to make decisions based on commercial considerations. Id. (referencing the Interim

Measures for the Administration of Working Capital Loans (“Interim Measures”)). Jangho

highlights the Government of China’s (“GOC”) questionnaire response that states that it

is an “explicit requirement of Interim Measures that the issuance of working capital loans

shall be prudently decided by banks based on a reasonable estimation of the borrower’s

working capital demand and fair consideration of cash flow, liabilities, repayment ability,

guarantee status and other factors of the borrower.” Id. at 16–17.

       Commerce continued to find, “as it has in prior segments of this proceeding, that

the GOC had a policy in place to encourage the development of the production of

aluminum extrusions through policy lending, and that Chinese [state-owned commercial

banks (“SOCBs”)] are authorities under the countervailing duty law.” See Decision

Memorandum at 83. Commerce explained that “[i]n the Aluminum Extrusions from the

PRC Investigation, Aluminum Extrusions from the PRC First Review, and Aluminum

Extrusions from the PRC Second Review, we determined that the GOC had a policy in

place to encourage the development of the production of aluminum extrusions through

policy lending. In the instant administrative review, the GOC’s discussions of the lending

practices of financial institutions echoed the discussion in previous administrative

reviews.” Id. at 43. Commerce also relied on its finding in Coated Free Sheets Paper from

the People’s Republic of China (“CFS from the PRC”): “that the PRC’s banking sector

does not operate on a commercial basis and is subject to significant distortions, primarily

arising out of the continued dominant role of the government in the financial system and
Consol. Court No. 16-00009                                                        Page 16

the government’s use of banks to effectuate policy objectives.” Id. (quoting CFS from the

PRC, 72 Fed. Reg. 60,645 (Dep’t of Commerce Oct. 25, 2007) (final affirmative CVD

determ.)). Commerce explained that it found Chinese SOCBs to be “authorities” within

the meaning of § 1677(5)(B)(iii), and further noted that this finding was not based on

“government ownership alone.” Id. at 84 (quoting from CFS from the PRC that

“information on the record indicates that the PRC’s banking system remains under State

control and continues to suffer from the legacies associated with the longstanding pursuit

of government policy objectives. These factors undermine the SOCBs ability to act on a

commercial basis and allow for continued government control resulting in the allocation

of credit in accordance with government policies. Therefore, treatment of SOCBs in China

as commercial banks is not warranted in this case.”). Commerce explained that “[i]n order

to revisit the determination in CFS from the PRC, there must be evidence warranting

reconsideration,” and found that “there is no such evidence on the record of this

administrative review.” Id.

       Commerce rejected Plaintiffs’ arguments based on the Interim Measures, noting

that it had previously considered the impact of these measures with respect to similar

arguments made in “Aluminum Extrusions from the PRC First Review and determined

that there is no basis to conclude that the GOC’s policy lending activities ceased with the

issuance of the Interim Measures.” Id. at 44. Specifically, Commerce highlighted that

“Article 34 of the [Law of the People’s Republic of China on Commercial Banks (“Banking

Law”)] states that banks should carry out their loan business ‘under the guidance of the
Consol. Court No. 16-00009                                                         Page 17

state industrial policies.’” Id. Commerce explained its determination that “[i]n the instant

review, because the Interim Measures are ‘fully consistent’ with the Banking Law, we

determine, consistent with prior determinations, that they do not constitute evidence that

the GOC ceased policy lending to the aluminum extrusions industry, despite any changes

to lending practices asserted by the GOC.” Id. Commerce therefore concluded that “loans

to aluminum extrusion producers from SOCBs and policy banks in the PRC were made

pursuant to government directives and, thus, constitute a direct financial contribution from

‘authorities,’” pursuant to § 1677(5A)(D)(i). Id.

         While Plaintiffs would prefer that Commerce consider the language of the Interim

Measures in isolation and draw an inference that Chinese SOCBs operate according to

commercial principles without regard to state policy, Plaintiffs have failed to demonstrate

that their position is the one and only reasonable conclusion that Commerce could reach

on the record. See Tianjin Wanhua Co. v. United States, 40 CIT ___, ___, 179 F. Supp.
3d 1062, 1071 (2016); Globe Metallurgical, Inc. v. United States, 36 CIT ___, ___, 865 F.

Supp. 2d 1269, 1276 (2012) (substantial evidence review "contemplates [that] more than

one reasonable outcome is possible on a given administrative record"). Accordingly, the

court sustains Commerce’s determination that Plaintiffs’ received countervailable policy

loans.
Consol. Court No. 16-00009                                                           Page 18

E.      Specificity of Tax Policies for High or New Technology Enterprises and Tax
         Offsets for Research and Development Under 19 U.S.C. § 1677(5A)

        A subsidy is specific as a matter of law “[w]here the authority providing the subsidy,

or the legislation pursuant to which the authority operates, expressly limits access to the

subsidy to an enterprise or industry.” 19 U.S.C. § 1677(5A)(D)(i). Commerce determined

that Preferential Tax Policies for High or New Technology Enterprises (“HTNEs”), as well

as the Tax Offsets for Research and Development (“R&D”) Program, are specific as a

matter of law under 19 U.S.C. § 1677(5A)(D)(i). See Decision Memorandum at 88–93.

Plaintiffs challenge Commerce’s findings of de jure specificity with respect to both

programs. See Jangho Br. at 19–20.

     Plaintiffs contend that the HTNE policies apply to a number of different industries such

that Commerce could not reasonably conclude that “the authority providing the subsidy,

or the legislation pursuant to which the authority operates, expressly limits access to the

subsidy to an enterprise or industry.” Id. at 19 (citing 19 U.S.C. § 1677(5A)(D)(i)).

In support of their argument, Plaintiffs point to the annex of the Measures of Recognition

of HTNEs, a list comprised of eight high and new technology areas that qualify for support

under Article 28.2 of the PRC’s Regulations on Implementation of the Enterprise Income

Tax Law. Id. Plaintiffs argue that because each category is further broken down into

39 sub-areas, and more than 200 specific areas, the HTNE tax policies apply to various

different industries and therefore are not specific under § 1677(5A)(D)(i). Id.
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       Commerce disagreed and determined that the HTNE tax program is de jure

specific in accordance with 19 U.S.C. § 1677(5)(D)(i) because the qualifying industries

are limited to eight specified industries. See Decision Memorandum at 89. Commerce

relied on its finding in a previous proceeding evaluating the same HTNE tax program that

“the reduction afforded by this program is limited as a matter of law to certain new and

high technology companies selected by the government pursuant to legal guidelines

specified in Measures on Recognition of HNTEs, and, hence, is specific under section

771(5A)(D)(i) of the Act.” Id. (referencing Citric Acid and Certain Citrate Salts From the

People's Republic of China, 76 Fed. Reg. 77,206 (Dep’t of Commerce Dec. 12, 2011)

(CVD review final results) (“Citric Acid and Certain Citrate Salts From the PRC”).

Commerce further found that “[b]oth the number of targeted industries (eight) and the

narrowness of the identified project areas under those industries support a finding that

the legislation expressly limits access to the program to a specific group of enterprises or

industries.” Id. Commerce found no new information on the record of this proceeding that

called into question its prior finding of specificity as to the HTNE tax program. Id.

Commerce noted that in its initial questionnaire, Commerce provided the opportunity for

the GOC to report any changes to programs that Commerce had previously evaluated.
Id. at 90. GOC responded that there were no changes during the POR to the HTNE tax

program. Id.

       Commerce’s conclusion that the HTNE tax program was “specific” under

§ 1677(5A)(D)(i) was reasonable. Commerce relied on undisputed evidence in the record,
Consol. Court No. 16-00009                                                           Page 20

as well as its past findings analyzing the same programs in prior segments of this

proceeding and other proceedings, to determine that the HTNE tax program was

expressly limited by legislation to be available to only to eight specified industries. The

fact that those industries can be further subdivided into various sub-categories does not

establish that Commerce’s specificity finding under § 1677(5A)(D)(i) was unreasonable.

       With respect to Commerce’s finding of de jure specificity under § 1677(5A)(D)(i)

as to the tax offset for R&D, Plaintiffs similarly contend that this finding was unreasonable.

See Jangho Br. at 20. Specifically, Plaintiffs provide a three-sentence argument that

“Commerce points to no evidence on the administrative record that such a policy exists

for the POR. It does not. As explained by the GOC, there is no policy targeting the

aluminum extrusions industry for development and assistance.” Id. Plaintiffs provide no

additional argument on this issue in their reply brief. See generally Jangho Reply.

       Contrary to Plaintiffs’ contentions, Commerce explained why its finding of

specificity with respect to the R&D tax offset program was supported by the evidence in

the record. See Decision Memorandum at 50 (noting that “The Program is administered

pursuant to the ‘Trial Administrative Measures for the Pre-Tax Deduction of Enterprises

R&D Expenses’ (“R&D Measures”)”, and that “Article 5 of the R&D Measures states that

eligible R&D projects shall be in line with national and Guangdong provincial technological

policies and industrial policies.”). Commerce further explained that it had found that “the

GOC has targeted the aluminum extrusions industry for development and assistance in

a manner that is specific under [§ 1677(5A)(D)(i)], as illustrated in the government plans
Consol. Court No. 16-00009                                                           Page 21

and directives, to encourage and support the growth and development of the aluminum

extrusions industry.” Id. at 51. “Given this finding and in light of the language in Article 5

of the R&D Measures,” Commerce “determined that tax reduction under this program are

de jure specific within the meaning of [§ 1677(5A)(D)(i)].” Id. Moreover, Commerce noted

that it had provided the GOC the opportunity to provide additional information with respect

to the R&D tax offset program, and that the “GOC responded: ‘There were no changes

during the POR to this program.’” Id. at 93.

       In light of Commerce’s findings and explanation, the court cannot see how it can

conclude that Commerce’s determination of specificity as to the R&D tax offset program

was unreasonable, especially given Plaintiffs’ barebones challenge. Accordingly, the

court sustains Commerce’s determinations that the HTNE and R&D tax programs were

specific as a matter of law under § 1677(5A)(D)(i).

                                     IV.     Conclusion

       For the foregoing reasons, it is hereby

       ORDERED that this matter is remanded for Commerce to give effect to the CVD

Order’s language excluding “non-aluminum extrusion components of subassemblies”

from the scope of the order; it is further

       ORDERED that on remand Commerce shall reconsider and further explain its

countervailing of aluminum extrusion “inputs” to the subject merchandise; it is further

       ORDERED that all other challenged aspects of Commerce’s Final Results are

sustained; it is further
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       ORDERED that Commerce shall file its remand results on or before November 24,

2020; and it is further

       ORDERED that, if applicable, the parties shall file a proposed scheduling order

with page limits for comments on the remand results no later than seven days after

Commerce files its remand results with the court.

                                                            /s/ Leo M. Gordon
                                                         Judge Leo M. Gordon

Dated: September 25, 2020
       New York, New York