Federal Circuit Lets Controversial AD/CVD Orders on Solar Cells, Products Stand
The U.S. Court of Appeals for the Federal Circuit on March 12 issued a decision affirming a lower court ruling that upheld antidumping and countervailing duties on solar products from China, finding Commerce was permitted to apply a different country of origin test in those orders from the orders it issued concurrently on Taiwan.
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At issue was a discrepancy between the 2011 AD/CVD orders on solar cells from China, where the normal “substantial transformation” country of origin test was applied and assembly of third-country cells into modules in China did not make them subject to AD/CV duties, and the novel “assembly test” applied in the China solar products order issued in 2015, where AD/CVD orders were applied based on where the panel was assembled, regardless of substantial transformation, and third-country cells assembled into Chinese modules were subject to AD/CV duties.
Beyond the sudden deviation from Commerce’s usual substantial transformation test method in the China solar products case, also complicating matters was that Commerce had applied the substantial transformation test in the solar products from Taiwan case, resulting in concurrent orders issued on solar products from China and Taiwan with different procedures for determining origin.
CIT had originally taken issue with these events in 2016, in particular on whether Commerce violated limits placed on applying AD/CV duties on China to products that derived most of their value from other countries (see 1606090047). After receiving further explanation from Commerce, CIT upheld the scope in a decision issued the following year (see 1707240047).
On appeal, the Federal Circuit agreed that Commerce had justified its use of the new assembly test in the China solar products order. First, Commerce has the authority to define the class or kind of merchandise subject to an AD/CVD order, including its country of origin, CAFC said. But it if it deviates from a previous policy or practice, it must provide an explanation for doing so, CAFC said.
Commerce’s explanation for applying the new test was reasonable, CAFC said. In the solar products from China case, the International Trade Commission had found injury to U.S. industry from solar panels manufactured in third-countries that were assembled into panels in China. Only by determining the country of origin by where a product was assembled could Commerce adequately address that injury through its AD/CVD orders, the agency had explained.
The departure from normal practice was also necessary because “the Chinese solar industry, anticipating a rote application of the substantial transformation test, had shifted its supply chains so that their solar imports to the United States would no longer fall within” the scope of the 2011 orders on solar cells, Commerce had said. “We agree that this is another good reason for departing from the substantial transformation test,” CAFC said. On the other hand, no such shift had occurred in the China solar cells and Taiwan solar products orders that made it so Commerce had to deviate from its substantial transformation test, Commerce had explained.
“We find that Commerce provided a reasoned explanation for its departure from the substantial transformation test and that its findings are supported by substantial evidence,” CAFC said. “We therefore affirm.”
(Canadian Solar Inc. v. U.S., Fed. Cir. # 2017-2577, dated 03/12/19, Judges Newman, O’Malley and Chen)