Clash Over Surrogate Values for Activated Coal Inputs Goes Before CAFC
U.S. Court of Appeals for the Federal Circuit judges didn’t ask much as, on Feb. 3, Chinese exporters led by Carbon Activated Tianjin faced off against petitioners and the United States regarding the results of two administrative antidumping duty reviews on its activate carbon products. The exporters argued, among other things, that the Commerce Department used too narrow a category of product when selecting a surrogate value for the prices of an input (Carbon Activated v. United States, Fed. Cir. # 23-2135, 23-2413).
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Commerce initially used only coconut shell charcoal to value the inputs. After a remand by the trade court, it switched to using a broader subheading that included the more specific headings for both coconut shell charcoal and wood charcoal. But, after a second remand, it reversed back to its original position, sparking the appeal to CAFC.
Before CAFC, Carbon Activated’s attorney, Stephanie Harmann, argued that Commerce should have used the broader subheading, not the subheading specific only to coconut shell.
“You're making a lot of arguments coconut shell shouldn't really have been considered,” a judge said. “But you, in the end, want both coconut shell and wood to be considered.”
Hartmann said that her side wasn’t arguing that coconut shell “is completely dissimilar.” Instead, it was arguing only that the record didn’t have enough evidence “about the comparability of the two.”
The judge asked who had the burden to develop the record. Hartmann acknowledged it was the plaintiffs, but said the compatibility question hadn’t become an issue until later in the proceeding. The Court of International Trade initially remanded the review results to Commerce based on a lack of evidence, she said, but Commerce didn’t reopen the record after that point.
She argued Commerce’s final results were based only on previous proceedings, which had different factual records, and a single footnote from the International Trade Commission’s determination after its initial investigation.
In turn, DOJ attorney Joshua Kurland said Commerce has used coconut shell alone as its input comparison for the last seven proceedings. The previous few reviews had even seen concern that the coconut shell category wasn’t narrow enough because it could also cover wood-based carbon material, he said.
“Commerce said it is not merely that we’ve used, but we have found in the past that coconut-based carbon material is a good source” of surrogate value for the plaintiffs’ products, he said. He argued Commerce’s decision wasn’t unreasonable.
The petitioner’s attorney, Melissa Brewer, agreed. She said the department “has built up a certain knowledge about activated carbon as products” over the past 12 reviews.
“I think what the respondent in this case is largely asking is for Commerce and the court to disregard the long history here,” she said.
“We also have other case law that Commerce also says something like, each administrative review is considered on its own facts and record,” a judge said. “In fact, I think the government’s going to rely on that principle in the next review, right?”
Brewer said she agreed. She argued the present case involves two principles: “certain practice that builds up over time with respect to an individual case” and “the fact that every record needs to stand on its own.”
But she claimed it was the exporters’ responsibility, when seeking a departure from longstanding practice, to build the record to support that departure -- especially as exporters already have the burden to build the record.
All parties stayed put to move on to oral argument for the next case, which challenged the results of Commerce’s 13th administrative review. In that case, Hartmann said that, responding to the prior review, the exporters had put some evidence on the record regarding the difference between coconut shell and wood-based charcoal inputs. But that evidence was misconstrued by Commerce, which ultimately incorrectly cited that ITC report footnote again, she said.
She also said the department ignored differences between coconut shell charcoal and a mandatory respondent’s charcoal, only describing similarities between the two and the distinctions between the mandatory respondent’s charcoal and wood charcoal.
The exporters also pushed back against Commerce’s selected surrogate value for hydrochloric acid. The department should have used Brazilian, not Malaysian, data, as the Brazilian import data is more specific to the input in question -- it actually covers hydrochloric acid, whereas Malaysia’s covers only hydrogen chloride, Hartmann said.
But the data Commerce used was “a good data set,” whereas the Brazilian data wasn’t from the primary surrogate, Kurland said.
Hartmann also argued that Commerce never informed Carbon Activated that its response to a supplemental questionnaire, which showed that its input should have fallen into the more specific category, was deficient.
“The lower court held it was reasonable for Commerce to require parties to demonstrate the purity of all of their purchases of hydrochloride,” she said. “Commerce never required Carbon Activated to do that. They never told Carbon Activated that their narrative response did not sufficiently demonstrate the input of purchase was aqueous hydrogen chloride.”
Brewer pushed back, saying that any notice of deficiency arguments had been waived because they’d never appeared in the exporters’ briefing.