CIT Sends Back Calculation Methodology for Lumber Exporters' Suppliers' Subsidies
The Commerce Department must more fully explain its calculation methodology used to account for the differences in volumes of lumber purchased by exporter Les Produits Forestiers D&G and its affiliate, Les Produits Forestiers Portbec, from unaffiliated suppliers, the Court of International Trade held in a decision made public Jan. 29. Judge Mark Barnett said the U.S. failed to "clarify Commerce's decision-making" behind the calculation in the expedited countervailing duty investigation on softwood lumber products from Canada.
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Barnett also upheld Commerce's use of exporter Fontaine's FY 2015 tax returns to calculate the amount of the tax benefits received by the company -- a move no party contested.
In a prior decision in the long-running case, the trade court remanded Commerce's decision not to account for subsidies received by unaffiliated lumber suppliers to certain exporters (see 2404230031). On remand, Commerce decided to account for the subsidies, recalculating the CVD rates for D&G/Portbec and exporter Mobilier Rustique, calculating a de minimis mark for D&G/Portbec but an above-de minimis margin for Rustique.
Commerce said on remand it would cumulate the benefits from subsidies given to the respondents with the benefits from subsidies given to the suppliers, calculating the subsidy rate by "first determining D&G’s and Portbec’s respective shares of their combined total sales," then multiplying each firm's purchases from unaffiliated suppliers by that company's respective shares of combined sales. The agency then found each company's unaffiliated lumber purchases as a "percentage of the combined total sales, to which Commerce applied the all-others rate of 14.19 percent." Combining these values with D&G/Portbec's own CVD rate, the result was 0.70%.
The petitioner, the Committee Overseeing Action for Lumber International Trade Investigations or Negotiations, argued that Commerce double-weighted the value of Portbec's and D&G's lumber purchases, proposing two alternative calculation methodologies.
The first, "Approach A," would have Commerce calculate separate CVD rates for D&G and Portbec using "each company's total sales as the denominator and that company’s supplier lumber purchases (multiplied by 14.19 percent) as the numerator." Then, the agency would add up the two subsidy rates after weighting them based on each company's sales level in relation to their combined sales.
The second alternative, "Approach B," would have the agency calculate one subsidy rate for D&G and Portbec using their "combined total sales as the denominator and their combined supplier lumber purchases (multiplied by 14.19 percent) as the numerator."
Barnett held that Commerce failed to address the petitioner's points. In responding to the committee's claims, the agency "merely restated" its draft remand position and its claim that “this calculation best reflects that portion of the unaffiliated lumber producers’ subsidies that D&G and Portbec each received based on their own particular quantity of lumber purchased and sales made during 2015." The agency failed to address the petitioner's "concerns regarding double-weighting" or explain why the agency considered its methodology better than the alternatives, "instead merely declaring it 'best.'"
Contrary to the government's position that Approach B treats D&G and Portbec the same, "this methodology appears to avoid the problem of weighting because it spreads the aggregate amount of unaffiliated supplier purchases subject to the all-others rate over the combined total sales to arrive at a single subsidy rate," the court said.
Approach B is distinct from Approach A, "which requires weighting based on D&G's and Portbec's respective share of the combined total sales," since the agency would first calculate each company's separate purchases and can't "simply sum those rates," the judge added. Barnett said the government's claim that Approach A "disregards Commerce’s practice of calculating a single subsidy rate for cross-owned companies" isn't persuasive, since "that is precisely what Approach A does after weighting the individual rates."
(Committee Overseeing Action for Lumber International Trade Investigations or Negotiations v. United States, Slip Op. 25-8, CIT # 19-00122, dated 01/21/25; Judge: Mark Barnett; Attorneys: Sophia Lin of Picard Kentz for plaintiff Committee Overseeing Action for Lumber International Trade Investigations or Negotiations; Mark Lehnardt of Davis & Leiman for consolidated plaintiff/defendant-intervenor Fontaine Inc.; Stephen Tosini for defendant U.S. government; Edward Lebow of Haynes and Boone for defendant-intervenors Les Produits Forestiers D&G and Les Produits Forestiers Portbec)