US Says Chinese Chemical Respondents Didn't Deserve AFA for Inability to Produce Old Contracts

The two mandatory respondents, Heze Huayi Chemical and Juancheng Kangtai Chemical, “could not currently locate land-use rights contracts obtained more than a decade ago based on the deadlines that Commerce provided,” it said. But, as a result, they gave Commerce other information, such as land-use certificates and proof of payment, and reconciled the latter with their financial statements, the U.S. explained.

That didn’t warrant an adverse inference because “Heze Huayi and Kangtai did not ignore Commerce’s request to provide land-use contracts, nor did they assert the contracts are no longer in existence,” it explained.

It acknowledged it was “undisputed” that the contracts were missing from the record. But it said the department had given both respondents an “alternative reporting possibility” and informed them it would be requesting the information again in the next review. The two had cooperated to the best of their ability, it claimed.

“[N]ecessary information is missing from the record -- this fact is not in contention, and the plaintiffs devoting several pages of arguments to explaining why this information is necessary does not undermine Commerce’s determination to apply facts otherwise available,” it said.

Petitioner Bio-Lab’s argument to the contrary merely reflected its “own subjective views” as to whether the companies had cooperated adequately, it said.

First, the U.S. said, Commerce’s initial investigation in 2013, despite what the plaintiffs claimed, couldn’t be considered sufficient notice that those particular land-use contracts might one day be requested.

That investigation made no mention of the land-use rights, it said. In fact, it said, the current review was sparked by Bio-Lab’s first-ever allegation that the rights constituted a subsidy. The petitioner’s claim was further weakened by the fact that “the need to investigate” the program “did not become apparent until recent events occurred, e.g. the 14th Five-Year Plan and Kangtai’s purchase of land in a new province,” it said.

And the other cases Bio-Lab cited -- in arguing that the mandatory respondents had been inattentive record-keepers -- involved “respondents who consistently submitted inadequate information, persisted in a pattern of unresponsive and evasive responses,” or either didn’t tell Commerce they were struggling to find information or simply didn’t provide the information at all, the government said. That wasn’t the case in the current review.

In one, for example, the department requested sales agreements four times in two reviews and never received a proper response, it explained.

The U.S. also disputed Bio-Lab’s argument that the payment slips the two mandatory respondents provided as substitution for the land-use contracts “were self-selective, are not itemized to indicate the potential for additional fees that might have overstated the original purchase price, contained questionable timing and payment amounts, and do not indicate that the payees were the actual sellers of the land-use rights purchases.”

It said this was all “mere speculation,” unsupported by any record evidence. Both respondents demonstrated how the prices they paid for land-use rights were calculated and tied them to their audited financial statements, it explained.

“The plaintiffs confusingly cite Nippon Steel to describe the two showings that Commerce must make before applying an adverse inference,” it said. “But in the following sentence, the plaintiffs argue that 'Heze Huayi and Kangtai did not satisfy either criteria [sic].' … Indeed, Commerce agrees that the respondents did not satisfy either criterion, which is why Commerce did not apply an adverse inference.”