CIT Upholds Denial of CEP Cost Offset for Indian Chemical Exporter

It also affirmed the department’s choice to rely on Gujarat’s allocated movement expenses, agreeing it wasn’t feasible -- in other words, wasn’t practical -- for the exporter to provide transaction-specific expenses.

“The government defends both its flanks, with the private parties’ roles reversed,” Judge M. Miller Baker noted -- Gujarat defending Commerce’s allocation finding, Daikin its offset denial.

Baker described the first issue, Commerce’s refusal to grant a constructed export price offset, as an “onion.” He opened by explaining that when Commerce constructs a U.S. price for an exporter, it still must, “to the extent practicable,” ensure the constructed U.S. price and the exporter’s home-market price represent sales made on the same level of trade. If they don’t, Commerce has make a level-of-trade adjustment to the home market price.

But sometimes the information simply isn’t there for Commerce to make a level-of-trade adjustment, Baker said. When that happens, Commerce offsets the exporter’s home market price by the indirect expenses of selling in that country. This is done under the “apparent” presupposition “that such costs would not have been incurred if the sale had been made on a less advanced level of trade,” he said. He noted that the law “calls this reduction a ‘constructed export price offset.’”

Commerce will only grant this offset when the data for conducting a level-of-trade adjustment is missing “despite full cooperation from the party requesting the offset,” he said. And the party that wants the offset bears the burden of ensuring all the requirements for it are met.

The department granted the offset for Gujarat even though it found the evidence for it was insufficient, Baker said, because it “reason[ed] that it would be unfair to hold the Indian producer responsible for holes in its evidence since it had no opportunity ‘to remedy the deficiency.’”

Baker said he remanded that decision because Gujarat had been given the chance to remedy any deficiencies in its initial questionnaire response by way of its supplemental questionnaire response. Gujarat had the burden to show the offset was applicable, but it hadn’t carried it, he said, as it “only provided qualitative support documentation for two of the 21 reported selling activities and no documentation at all pertaining to a quantitative analysis.”

“Gujarat does not point this court to any place in the record where it provided the requested information,” he said.

He also discussed petitioner Daikin’s challenge to Commere’s choice to rely on Gujarat’s allocated movement costs.

The governing regulation requires movement costs be reported on a transaction-specific basis unless that would be “not feasible,” he said. In that case, Commerce can turn to allocated expenses so long as they would not be inaccurate.

The dispute between the parties is over the legal standard required by the word “feasible” in the regulation, Baker said.

“Does it mean what is possible, or rather what is practicable?” he asked.

Daikin, he said, was contending that so long as it was possible to do so, the regulation required that Gujarat provide Commerce the cost data on a transaction-specific basis. Even the U.S. “does not dispute that with enough time, toil, tears, and sweat -- if not blood, which no doubt Daikin would also demand -- Gujarat could do that,” he said.

The Supreme Court had occasionally ruled “feasible” to mean “possible,” Baker agreed -- but not when other parts of a regulation seemed to point instead toward interpreting “feasible” as “practicable,” he said. And the regulation at bar also requires Commerce, “in assessing feasibility,” to “take into account the records maintained by the party ... in the ordinary course of its business, as well as such factors as the normal accounting practices in the country and industry in question and the number of sales made by the party during the period of investigation or review,” Baker said.

“The common denominator of these enumerated (but non-exclusive) factors is that they bear on practicability,” he said.

Reading the regulation in that way, Gujarat could be considered to have participated in the investigation to the best of its ability, he said. He affirmed as reasonable Commerce’s determination that expecting it to conduct a “‘manual review’ of ‘thousands of pages of records’” wasn’t feasible.

(Daikin America v. United States, Slip Op. 25-22, CIT # 22-00122, dated 03/07/25; Judge: M. Miller Baker; Attorneys: Roger Schagrin of Schagrin Associates for plaintiff Daikin America; Brian Boynton for defendant U.S. government; Jessica DiPietro of ArentFox Schiff for defendant-intervenor Gujarat Fluorochemicals Limited)