BYD: Commerce Skirted Congressional Intent in Circumvention Finding on Cambodian Solar Cells
Congress didn't give the Commerce Department authority to deviate from certain principles associated with anti-circumvention proceedings whenever it thinks the effectiveness of an AD/CVD measure has been threatened "by changes in manufacturing methods or supply chains," Solar cell exporter BYD (H.K.) Co. argued. Filing a reply brief last week with the Court of International Trade, BYD said Congress laid out only a "very limited number of specific manufacturing scenarios" that can be deemed "circumvention" (BYD (H.K.) Co. v. U.S., CIT # 23-00221).
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The exporter said Commerce ignored these clear statutory limits when it said BYD's solar cells and modules from Cambodia circumvent the AD/CVD orders on the same goods from China.
Commerce said that its circumvention finding fit under the statutory category covering instances where an exporter shifts part of the production process from the original subject country to a third country and the process in the third country is "minor or insignificant." BYD said that Congress clearly meant for the category to "be limited to circumstances where the processing is truly 'minor or insignificant,'" such as "a simple 'screw-driver' assembly operation."
This exception was never meant to cover "situations such as here, where the agency concedes that the most significant and technologically complex part of the production process has been moved to the third country" and "where it is conceded that the imported parts are 'substantially transformed' in the third country into new and different articles with a different country of origin," the brief said. It's "irrational" to characterize BYD's operations in Cambodia as "minor or insignificant" and such a conclusion "finds no support in the statute," the brief said.
At the heart of BYD's case is its use of unaffiliated toll-processors in Cambodia to complete the most complex part of the solar cell manufacturing process. The exporter criticized Commerce for failing to include the Cambodian toll-processors' activities in its analysis of the amount of processing occurring in Cambodia. Instead, the agency considered only the level of investment, research and development and production facilities by BYD in Cambodia, placing the greatest weight on R&D levels (see 2411010057).
Ignoring the unaffiliated processors' work led the agency to find there to be "little to no processing being performed in Cambodia when, in fact, the opposite was the case," the brief said. The agency disregarded these operations because the work was done by third parties. The exporter said "the statute does not permit Commerce to ignore processing actually performed in the country in question simply because it is conducted on a contract basis."
Nowhere in the anti-circumvention laws or in their legislative history "is it stated or implied that Commerce may choose to disregard processing activities performed in the third country because they are not carried out by the respondent itself," the brief said.
Commerce said such a move is allowed because it was trying to address a specific anti-circumvention scenario -- namely, where BYD skirted the orders by moving production to Cambodia instead of engaging in the processing itself. The exporter said this is "not how the statute was written." While it's lawful to compare the amount of processing in Cambodia and China, BYD conceded, "that is a different question from whether it is permissible to exclude consideration of the activities actually performed in the third country from this analysis."
Commerce conducting a review of the statute under Loper Bright Enterprises v. Raimondo, which says the courts should choose the best reading of an ambiguous statute using the traditional tools of statutory interpretation, would lead to "absurd results," BYD said. Under the agency's interpretation of the law, if 90% of processing steps were transferred to Cambodia, the agency could disregard that 90% and find that the processing in Cambodia is minor or insignificant compared with the 10% of the processing done in China. "This cannot be," the brief said.
In addition, BYD said Commerce applied an incorrect read of the terms "minor or significant," arguing that all the tools of statutory interpretation confirm that these terms in the context of the circumvention law mean that the processing is "inconsequential" or of "little importance." The exporter said the "processing in Cambodia is so far beyond that standard that no reasonable or unbiased person could possibly conclude otherwise."