Commerce Says Contractual Relationship Between Supplier, Exporter Doesn't Show Affiliation
The Commerce Department continued to find on remand at the Court of International Trade that respondent Louis Dreyfus Co. Sucos S.A. and an unnamed supplier, dubbed "Supplier A," are not affiliated, nor are they partners. The agency said it's important to "distinguish 'exclusivity' from 'reliance'" in conducting affiliation analyses, noting that an exclusive relationship with a supplier doesn't mean a party isn't "perfectly capable of acting independently if the exclusive relationship is no longer in its interests" (Ventura Coastal v. United States, CIT # 23-00009).
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Applying the trade court's definition of "partners," which the court established after a Loper Bright analysis of the applicable statute, Commerce then said Louis Dreyfus and the supplier aren't partners. Commerce submitted a heavily redacted breakdown of the supply agreement between the two parties, finding that the two have "entered into a contractual relationship, but the rights, obligations, and penalties for noncompliance" show that the two companies "do not share risk or reward outside the terms" of the deal.
CIT sent back the antidumping duty investigation on lemon juice from Brazil in November 2024, telling the agency to redo its analysis of whether Louis Dreyfus and Supplier A are affiliated or are partners (see 2411180024). Judge Claire Kelly said the agency failed to consider whether Louis Drefyfus has the "ability to control Supplier A," and whether the supplier is "reliant" on the respondent. The judge said the agency's conclusion that the parties have "no obligation to each other beyond the contract is conclusory."
On remand, Commerce differentiated between exclusivity and reliance, ultimately finding that Supplier A isn't tied to Louis Dreyfus. In a heavily redacted analysis, the agency said that just because two parties agree to contractual terms requiring specific performance by one party, "that is not sufficient to demonstrate that the party is 'reliant' on the other or that the other party exercises 'control' over the other."
The agency added that there's evidence showing that the supplier could develop a relationship with other producers in Brazil. Turning to the CBP data it used in picking mandatory respondents, Commerce said there are "several" other lemon juice takers operating in Brazil. Commerce also said the discussion of "reliance" is only the "threshold consideration" for the agency's "close supplier relationship analysis." If reliance exists, the agency then decides whether one of the parties can exercise direction over the other.
"Nonetheless, there is no record evidence that either LDC or Supplier A dictated sales terms to, or otherwise had the ability to control the other company," the remand results said.
In its decision, the court also established a definition of partners that the agency was to apply. The court said partners are not only entities that are "involved in joint selling or joint ownership" but also "more generally form a cooperative endeavor in which they share risk and reward."
Commerce said on remand that "record evidence does not support the conclusion that LDC and Supplier A are in a 'cooperative business endeavor,' such as an association, joint venture, or unincorporated organization." The agreement between the parties is "merely a contractual relationship not indicating any further 'cooperative' aspect of the parties relationship beyond the terms of the contract agreed to by the otherwise independent parties," the brief said.
The agency found there is no evidnece that the parties "have shared risk or reward within the terms" of their deal, "such that the success or failure of one party would be transferred to the other party."